An affordable way to have access to a part time and highly skilled Finance professional for your healthcare business. It's time to engage a virtual CFO!
Indroduction
To all New Zealand healthcare businesses (and all NZ SME’s for that matter), just letting you know you can, and should, have your own Chief Financial Officer (or "CFO").
Really!!
CFO’s are now able to support you in the same way you are likely to be supported by your lawyer or tax specialist. Like these external expert providers, there has been a move in the commercial CFO world to provide a similar “pay as you need” service offering.
A large organisation is likely to have a strong finance team led by a fulltime CFO. Smaller organisations are less likely and, simply put, can’t because they’re too expensive. Introducing the “virtual CFO” or "vCFO" as they are commonly abbreviated too.
The vCFO concept allows smaller organisations to access top talent in a way that they couldn’t afford if they sought to hire someone full time. The vCFO enables smaller companies to benefit from financial advice that would have previously too costly.
This article is about the virtual CFO (or vCFO), what this means and why the vCFO is a great and inexpensive option for a health care business who will periodically need to navigate financial tasks that may require a higher level of expertise than your business currently has access.
In New Zealand and abroad the use of the vCFO is becoming more common place and great for all of the non-NZX listed health care businesses.
What is a vCFO?
“Virtual CFO” stands for virtual chief financial officer. A virtual CFO is basically a highly commercial and highly skilled finance professional with years of great experience. Some vCFO will be part of an extended network of financial service providers and others will work independently.
Most vCFO will have come from years as full time CFO’s and are now looking to move their experience from one organisation to multiple client businesses. The simplest description is that they’re “part-time” …… although the word “virtual” seems to have stuck, They will likely balance their vCFO work with taking up Board positions and may be other lifestyle changes after working 60 to 70 hour weeks for much of their careers.
The word “virtual” is worth defining.
The following is sourced from the Oxford dictionary – I have added illustrations:
- “Almost or very nearly the thing described, so that any slight difference is not important.”
Although Liz wasn’t their full time CFO, because she was the main point of contact for those tricky Finance questions she was virtually the CFO.
AND/OR
- “Made to appear to exist by the use of computer software, for example on the Internet”
New technology has enabled development of an online “virtual office.”
What is not a vCFO?
It is important to do your research when deciding to engage a vCFO. In a recent Chartered Accountants Australia and New Zealand “Acuity” magazine article called, “”Rise of the Virtual CFO” they warned that there were firms saying they were offering vCFO services that was anything from bookkeeping providing a bit of advisory to public practice firms who provide monthly and annual financial statements and income tax returns. This is not what a vCFO does.
A true virtual CFO provides a level of service equivalent to that of a full time CFO, only part time. The vCFO should be seen as part of your greater health care business team. It is not just about providing forecasts, reports and analyses. The Acuity article stresses, “The vCFO is about helping the business to focus on successful strategies and managing performance through accountability and not with finalising their annual accounts.”
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Why would you hire a vCFO?
The following are some of the main reasons to hire a vCFO but not limited to:
- A highly experienced CFO, who can add value to your business quickly, will have come from full time roles where they are earning well in excess of $200,000 p.a. The vCFO provides access to a skilled Finance professional with both commercial and financial expertise at a fraction of the price of hiring a full time CFO based on time. This may be by the hour, day or some other mutually agreed time frame.
- It should be expected that a vCFO will have access to expertise not readily available to your business through their professional affiliations and networks.
- The vCFO will have worked successfully across banks, external auditors, lawyers, property or business valuers, insurance brokers to name a few and be able to engage at their level on your business's behalf.
- Ideally the vCFO you engage is familiar with your industry, or better still worked in it, and has access to wider industry knowledge, and
- A vCFO will be impartial to your business and able to recommend strategies without bias.
When would you hire a vCFO?
- Most importantly, engage a vCFO before you need one. This is like your lawyer where you don’t need them all of the time but when you do it is better to know someone than panic finding assistance quickly. The risk of engaging the wrong person who doesn’t understand your business could cost a lot for relatively little positive outcome.
- The vCFO can assist when you and your Board are not receiving timely or meaningful reporting on the performance of your business. This includes assisting with sometimes complex forecasting of banking covenant ratios or obtaining further capital or debt funding.
- When a business is experiencing significant growth in revenue and the Finance reporting and IT needs are not keeping up. And also if there is unexpected deterioration in revenue.
- When there are plans to sell the business in next three to five– years or making a business acquisition, and/or
- When decision makers are in need of strategic guidance and how to connect with future financial performance.
You are also looking for a vCFO that should have demonstrated experience working in a commercial business environment and a strong business acumen.
And it is generally expected that a vCFO has a finance related university degree, professional accountancy qualification such as Chartered Accountant NZ or CPA Australia and sufficient relevant experience.
You should plan to meet face to face or online with a few potential vCFO just like having an interview for one of your existing team. Culture fit within your organisation is critical.
Don't let Covid keep us apart!
Through necessity, we have all learnt a lot about how to connect with family and friends, work mates and external suppliers using technology. Although nothing beats meeting face to face we have needed to adapt. Who would have thought two years ago we would all become experts with Zoom, Teams and other cool technologies?
These technologies are “tools of trade” for all vCFO with many working from a home office and very well set up and resourced to ensure a high quality of communication. Of particular benefit is that geography is no longer an issue and if your business is in Invercargill you can work effectively with your vCFO in Auckland.
Conclusion
By engaging a virtual CFO, you can expect to see profitability improvements, improved management reporting, as well as a more effective and efficient accounting team. This allows you to have more time to focus on your business and make better decisions which ultimately will allow you to see profitability improvements.
We recommend the following steps to making a vCFO part of your team:
- Every business, no matter how small, can have a vCFO – A vCFO is highly affordable when, like a lawyer or valuer, the cost is based on a “pay as you need” service. And you will get the best return on investment by including your vCFO as part of the team. This is how a vCFO gets to know your business and provide the very best value.
- Engage your vCFO now - Engage a vCFO before you need one. It is far better to know your vCFO rather than panicking to find financial assistance. The risk is that you engage a consultant you have only just met and that does not understand your business, is expensive and could cost a lot for relatively little positive outcome.
- Industry experience is a “nice to have” and not a necessity – It is always a benefit to have a vCFO with specific industry experience related to your business. But, do not let this get in the way of engaging a vCFO who is a great fit with your company culture, has the demonstrated financial experience you need and with a little time, and their own research in to your business and industry, work out just fine.
We can help
You have a sound Finance team or utilise a local chartered accountant with your accounting needs but sometimes you need a little more experience, especially with expertise in your health care industry. The very best way to do this without it costing the earth for a full time resource is with a highly experienced virtual CFO who you can utilise on as "as needed" basis. It would be my pleasure to assist you with your vCFO needs.
In the first instance that vCFO would be me.
Please refer to the SERVICES page for what we offer and LINKEDIN for my experience.
______________________________
Stuart Bilbrough
B.Comm, MBA (Dist.), CA (NZ)
Peak Care Advisory
Mob: 021 252 5778
Email: stuart@peakadvisory.co.nz
Website: www.peakadvisory.co.nz
8th February 2022
