We are focusing Watchful Eye on enabling Virtual CFOs to understand the quality a businesses accounting processes so they can improve these to ensure the financial reporting is reliable before moving on to add value with more strategic advice. A good article on why Virtual CFOs are becoming more prevalent and how technology has assisted this.
Practices offering virtual CFO services tend to develop closer relationships with clients.

Practices offering virtual CFO services tend to develop closer relationships with clients.

Practitioners performing the role of a virtual CFO are not only widening their client base and growing revenue but riding a wave of increasing demand.

By Tony Kaye

When Adam Lacey launched the residential property development company Lacey Group in 2016, he knew having the best people would be essential for its success.

Business volume wasn’t a problem. As a start-up founder, Lacey was off to a flying start with A$90 million of construction projects in the pipeline.

However, even with plenty of work and a strong background in the property and corporate sectors, he realised rapid growth can present challenges and often require specialist business expertise.

Accordingly, one of Lacey’s first decisions was to appoint former colleague and group financial controller of property development company Sunland Group Limited, Scott Springer, as his CFO. As well as being personally acquainted with Springer and tapping his financial talents, there was one further advantage. Lacey was able to secure Springer on a virtual, rather than full-time basis.

This has become a rapidly growing trend in Australia and abroad, with start-ups and even established businesses choosing to hire virtual CFOs to oversee and undertake key ongoing business tasks.

“I’m a boutique property developer and my business model is about keeping overheads down as much as possible,” Lacey says. “With that in mind, a virtual CFO suited my requirements.

“The team handles all my accounting requirements and end-of-year tax requirements and reporting, and then there’s a lot of ad hoc needs on a month-to-month basis such as reviewing spreadsheets, looking at feasibility analysis with me, and providing taxation guidance.”

Strengthening client relationships and increasing income

As well as making compelling business sense, particularly in terms of cost reduction, practices offering virtual CFO services tend to develop closer relationships with clients.

Springer is a registered accountant and founder of Virtual CFO Solutions, which has a varied client base with needs ranging from general accounting to business and financial advice, financial and KPI monitoring, regular contact and management consulting.

Other services include strategic planning, compliance and business reporting for both listed and unlisted entities.

“The services offered and level of engagement as a virtual CFO vary significantly, and it ultimately depends on the client,” Springer says.

“A start-up business is basically starting from scratch, so they may need a business plan and financial forecasts and then ongoing monitoring of those forecasts.”

Established businesses will generally have different and greater needs. For example, many will have a bookkeeper in-house or part-time, but require a specialist accountant with a higher level of experience to manage taxation issues and other financial information or deal with banks and financiers on behalf of the company.

Being able to reach out to a broader client base means practices can generate new income avenues.

“I have clients that are ongoing on a weekly basis and others that use us monthly,” Springer says. “It all depends on how many contact points the client wants. If they need phone calls every week and an actual face-to-face once a month, it’s not necessarily always virtual. I work out of their office, but there’s a lot of contact points throughout with them as well to get them what they need.

“It’s all tailored to each individual client, what stage of business they’re at, and what they actually need in the business at that time.”

Accounting and technology form a powerful mix

Erik Asgeirsson, president and CEO of US-headquartered CPA.com (formerly CPA2Biz Inc.), adds that the growth in virtual CFO services is closely related to the increased sophistication of technologies in the accounting sector, enabling practices to seamlessly integrate with the software platforms used by clients.

This allows practitioners to undertake work remotely and readily upload and download data between different computer systems.

Related: Technology, talent and advisory – findings from the 2018 IFAC Global SMP survey

“Technology is changing the practice of accounting and creating a range of opportunities,” Asgeirsson says, noting that in the US, 10 per cent of all accounting firm revenue now derives from virtual CFO services.

“Technology is offering so many opportunities for practitioners today. If you look at what cloud accounting has done, it really created the virtual CFO movement, which is happening around the world.”

Springer says being able to integrate with clients’ IT systems is critical for virtual CFOs.

“Being virtual really only works if you can access timely information as required. When clients need something urgently, we’re able to log in, make sure everything is up to date, and get out what we need to provide them. A big part of being able to be virtual is the software used [by] clients and making sure that it’s right for [them].”

Starting on a firm financial footing

Mike Sewell, director Market Gap Investments, which assists second stage growth companies to commercialise and implement strategies, agrees that utilising a virtual CFO can be a smart decision.

“These companies often cannot afford to hire people, so having someone like a virtual CFO can help because they don’t need someone there all the time, but they do need someone almost weekly, even if that’s electronically and via the phone, just to provide some guidance,” Sewell says.

“It’s about working with people to help them succeed and to help them to understand what they need to succeed, and that’s where a virtual CFO is almost essential.”

In other words, the financial rigour a virtual CFO can provide may often be one of the key stepping stones to ultimate business success.