Understand The Role Of A Virtual CFO In Fundraising Process

CFO India explains that a virtual cfo services are those where an SME has an in-house team of finance and accounts but do not have an in-house CFO, a finance partner in their growth journey. A virtual CFO solutions providers help the SMEs and their teams on various financial challenges, navigating through them efficiently, instituting financial processes and providing professional advice, analysis, and support to the management.

Hiring CFO outsourcing services is an expensive proposition for many SMEs, however, taking professional financial guidance is of prime importance to an SME’s growth and stability. Virtual CFOs normally provide advice over managing finance and accounting, compliances, corporate governance, reporting and strategic advice. A virtual CFO guides as a financial mentor for a business’s financial success.

One of the biggest hurdle that and entrepreneur and SMEs encounter is of raising investments for their business. Finance works like fuel for the business and raising investments in time is a prime most important activity for any business. While investing in a company, an investor often looks for a dream team, a set of people on whom they can bet their money and have the faith that the entrepreneurs can execute the ideas as they have planned.

More often, they give importance to the team over and above the product description. Since the financials are extremely critical, the business CFO is given a role which is considered second only to the CEO. If one scans business history, they will observe that most of the successful CFO’s went on to become CEO’s of their companies although not necessarily in a single step.

  Below is the list of key attributes of Virtual CFO that makes their role in fundraising process crucial 

Detailing

Since CFO’s come from technical backgrounds of finance and are usually either CA’s or CFA’s, it is one of their skills to look at the financial project in utmost detailing. In fact, good virtual CFOs are those people who can read well between the numbers. Virtual CFO’s plan and discuss all major processes in a business as to utilize the funds efficiently and leading to saving money for the company.

Operation Excellence

Raising finance requires having the key operational processes in place. However, at the same time, it is important to install the right amount of process, reporting, and structure. If overdone, this can slow down the system but if managed well by the CFO advisors it can help in operating the business smoothly and grow the engine. Such operation helps in better and faster scaling the organization.

Making the deal

The virtual CFO does not only run the deal process of funding but should also bring deal flow into the company. Virtual CFO’s usually have a track record of originating and closing equity deals and possess a long list of potential financial sources that are willing to take their call. The virtual CFO’s also stretch the entrepreneurs funding expectations by knowing which expenses to cut or postpone without harming the business.

Sound & trusted advice

It is important to keep the internal discussions of the company within the key members of the company only. A virtual CFO is a trusted advisor to the CEO and other executives. Running a business is a lonely journey and the CFO advisor can be a key objective source of advice and council to make big or small financial decisions.

Jack of all trades 

A virtual CFO may require to play other roles in the fundraising process and support the entrepreneur while pitching to the investor. Usually, this role goes beyond finance for the CFO and they need to justify plans on behalf of HR, technology or marketing teams as well. Example, it will be challenging for an SME to outsource each legal document to a law firm and the CFO might need to review documents or make some changes on behalf of the company.

Prior experience and network

A virtual CFO manages few customers’ financial operations and over a period of time, they build their own strong network and experience to handle various challenges during the investment process itself. The CFO’s network helps the entrepreneurs to find more customers, collaborators or investors as well. At the same time, the experience helps in completing the entire process smoothly and in the interest of the entrepreneur.

Credibility

A virtual CFO is able to display an entire team to the investor while standing with the entrepreneur. Moreover, the CFO’s experience not only helps in tackling the queries and suggestions of the investors but also bring credibility to the company, process as well as the investor. Investors especially in the initial days invest money on people and not the products and having a dependable virtual CFO simplifies this entire process for all the parties involved.

Conversion and post investment tasks

One of the biggest roles the CFO plays is to convert the investment proposal in the favor of the entrepreneur and the business. Post a successful conversion of funding round, the deal also requires certain processes and tasks to be successfully followed-up and keep sharing necessary reports of milestone achievements with the investors regularly.

Then the role of a virtual CFO is very different from traditional CFO roles. This role demands a more hands-on approach and guide entrepreneur in building a successful relationship with the investor, deal making, governance, reporting and other operational matters. It also demands an integrated approach to regular business activities and planning process in theory a CFO roles deals with accounting and financing, however, in reality, SMEs look forward to receiving leadership from CFO’s. A virtual CFO in India creates a sustainable and seamless process for an entrepreneur’s success. Process and consistency are a key and entrepreneur should seek the CFO’s advice at every step of fundraising.

Investors today are getting more involved in businesses and are looking for information to be delivered faster. They are looking for projections which are updated regularly as per changing environments and standardized reports. Along with financial expertise, the investors today expect a virtual CFO to possess skill is sophisticated development and responsible business planning. With such new challenges, it has become imperative for entrepreneurs to hire CFO outsourcing services to help them meet the investors’ expectations and guide the entrepreneur to build a prudent and financially sound company.