Column: Stuart Bilbrough, Peak Care Advisory
To all New Zealand healthcare businesses (and all New Zealand SMEs, for that matter), you can and should have your own Chief Financial Officer.
CFOs can now support you like you are likely to have 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 will likely have a strong finance team led by a full-time CFO. Smaller organisations are less likely and, simply put, can't because they're too expensive. Introducing the "virtual CFO."
A virtual CFO is a highly commercial and highly skilled finance professional with years of experience. Some Virtual CFOs will be part of an extended network of financial service providers, and others will work independently.
Most Virtual CFOs will have come from years as full-time CFOs and are now looking to move their experience from one organisation to multiple client businesses. The most straightforward description is that they're part-time, although the word "virtual" seems to have stuck. They will likely balance their Virtual CFO work with taking up Board positions and may be other lifestyle changes after working 60-hour weeks for much of their careers.
It is essential to do your research when deciding to engage a Virtual CFO. A recent Chartered Accountants Australia and New Zealand article advised that some firms offer Virtual CFO services, completing tasks such as bookkeeping and providing a bit of advisory to public practice firms that conduct monthly and annual financial statements and income tax returns. This is different from what a Virtual CFO does.
A true virtual CFO will provide a service equivalent to a full-time CFO, only part-time. The Virtual CFO should be seen as part of your greater healthcare business team. It is about more than just providing forecasts, reports, and analyses. The Virtual CFO is about helping the business focus on successful strategies and managing performance through accountability, not finalising their annual accounts.
The role of a virtual CFO should be someone from a skilled financial 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 another mutually agreed time frame. Ideally, a Virtual CFO would have previously worked across banks, external auditors, lawyers, property or business valuers, or as an insurance broker, to name a few, and be able to engage at their level on your business's behalf. It is also important for a Virtual CFO to be impartial to your business and able to recommend strategies without bias.
Another vital step is to form a relationship before you require a Virtual CFO, such as a Lawyer. Engaging the wrong person who doesn't understand your business could cost a lot for a relatively little positive outcome. The Virtual CFO 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.
The right time to hire a Virtual CFO would be to assist with significant growth within a business' revenue, assist with financial reporting, or if there are plans to sell the business within the next three to five years. A Virtual CFO would also be helpful in moments such as business acquisition or when guidance is needed on connecting with future financial performance. A Virtual CFO is generally expected to have a finance-related university degree, professional accountancy qualification, and sufficient relevant experience. You are also looking for a Virtual CFO with demonstrated experience working in a commercial business environment and strong business acumen.
Technologies, such as video calling, are 'tools of trade' for all Virtual CFOs, 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 Virtual CFO in Auckland.
By engaging a Virtual CFO, you can expect profitability improvements, improved management reporting, and a more effective and efficient accounting team. This gives you more time to focus on your business and make better decisions, ultimately allowing you to see profitability improvements.
A Virtual CFO is highly affordable when, like a lawyer or valuer, the cost is based on a 'pay as you need' service. You will get the best return on investment by including your Virtual CFO as part of the team. This is how a Virtual CFO will get to know your business and provide the best value.
