For any business, having a core finance officer is important. But hiring a Chief Financial Officer (CFO) on board is not only difficult, but an expensive task as well- especially for startups. Understanding this, the industry has introduced something called a Virtual CFO.
Virtual CFO, as a phenomenon is not new and has been evolving from the last few years, primarily in the international markets. It can be defined as an outsourced service that offers high quality assistance to startups in their day to day financial issues at an affordable cost. This include services like resource mobilization, building sustainable business model etc, on round the clock accessibility.
One recent entrant in this service is a Delhi based financial advisory firm Alamak Capital. The company has recently introduced their “Virtual CFO Services” for Start Ups, SME’s and SMB’s. Till now it has 5-6 clients across industries that include real estate, travel and tours, iron and steel, food processing and education.
According to Rajesh Mittal Founder & Managing Director, Alamak Capital the need and importance of Virtual CFOs is rising. “A Virtual CFO helps a startup to add value and strategic aspects of its finance function. It is this strategic aspect which helps in more value creation than mere outsourcing of certain processes which results in limited cost saving,” said Rajesh.
Aristotle Consultancy is another such virtual CFO Service provider from Gurgaon. Started its operations in 2011 with a group of experienced professionals, the company today has nearly 14 clients across sectors.
A CFO goes beyond accounts to build a sustainable business model, but SMEs are often constrained by limited budgets, a small scale of operations and a traditional family-run approach. That is why chartered accountants or auditors often fill the gap. But when it requires a more experienced hand, Virtual CFOs is the way to go.
“The need for a high-quality CFO has now arrived in India,” says Deepak Dhamija, Co-founder at Aristotle Consultancy. “The most critical resource for a startup is the CEOs time and it should be spent on acquiring and servicing their customers.” He adds, “startups and small companies are increasingly looking at affordable, professional, end-to-end solutions to their financial needs”.
A virtual CFO primarily takes care of all the complete financial needs of the company, from payroll to vendor payments and report which needs management analysis to taxation and accounting. Moreover, such CFOs often have strong relationships with banks and financial institutions, which come in handy when the company negotiates a loan or encounters any financial crisis.
“A CFO should ideally focus on managing fund-flow and on other crucial business financial aspects. But a lot of CFO time is spent on managing transactions such as accounts payable and receivables and finalising accounts which consumes a significant time the CFO should ideally spend on strategic initiatives. CFO support – otherwise known as Virtual CFO-is invaluable business tool to free up that time at the top of the corporate pyramid through the taking over of finance department transactions by a qualified BPO specialist,” said Rajesh Venkat, Chief Executive Officer at Sundaram Business Services, a global Business Process Outsourcing (BPO) service provider.
Over the last 12 years the company has helped several CFOs address their challenges of high transaction volumes, huge amounts of paper work and delays in availability of actionable information, through its accounts payable, receivable and financial reporting services. Between its Indian and International clients, Sundaram Business Services offer some variant of these services to over 10 companies.
Most of these companies, including Aristotle Consultancy, offer their services on a monthly retainership model. They offer various custom packages to the clients and charge them on the basis of the client requirements, company’s team size and other factors that influence the volume of work.
While operating these players often face a number of challenges in India. The biggest of which is a limited business opportunity, which is particularly limited to the metro cities, as not many people know about the existence of such services in India.
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