vcfo Finance FAQs
There are common questions we get from prospects searching for financial consulting firms and virtual CFO services. We’ve highlighted key questions we think may be helpful to you.
Do you receive accurate, timely financial metrics and information from your team to support key decision making? If not, you should require that from your team. If they are unable to comply, then you should consider financial consulting firms or interim CFO consulting as an alternative leadership source. It may be that your team needs an updated accounting system or guidance in best practices, and vcfo is one of the most expert, experienced financial advisory firms for critical projects like these.
I’ve always had an in-house CFO on my team. How does vcfo's virtual CFO services approach affect financial leadership and how could it benefit my company?
Individuals are the sum of their experience and knowledge. vcfo’s team model expands upon each individual’s experience and knowledge by bringing the collective experience of our entire team to address your company’s needs. In addition, vcfo provides different levels of expertise and experience to support your company’s needs. If the deliverables require CFO attention, it is addressed by your virtual CFO. Many financial executables should be done by staff level resources at a lower billing rate. As a result of our team approach, you get the benefit of specialized and flexible levels of experience and support, paying for only the time you need and at a blended, cost effective rate.
We can do that if that is what the company needs, but more often we are an addition to the existing team. The company may have lower level staff in place and need departmental leadership and guidance. Sometimes there is a hole in the department staffing or a burst of project work that needs to be addressed such as an audit or acquisition. In other situations, for one reason or another, the company does want to replace a team member with an outsourced resource and needs to consider permanent CFO solutions. We are flexible in addressing each company’s requirements.
Optimized Capital Structure
There are usually three common issues we see:
- Companies may not realize how much equity they have granted in their earliest days because of poor record keeping and documentation of verbal agreements. Such grants are generally extremely difficult to modify later, should the original shareholders not jointly desire to continue supporting the business.
- Companies often make equity grants early in their history due to low available capital. Such equity grants can be prohibitively expensive in retrospect after a company becomes better organized and increases its value.
- Finally, it’s extremely important to show that all existing shareholders have fully purchased their equity. vcfo recommends that companies review documentation in each of these areas with their legal counsel.
vcfo views any equity issued to be the most expense consideration a company may ultimately pay. Companies should be cautious and comprehensive in planning for grants of equity to its employees, service providers and investors. vcfo has developed metrics and best practices in this area, and as part of its CFO advisory services, uses those in making recommendations to clients.
vcfo assists its clients in the development of detailed, bottoms-up operational forecasts. Such forecasts include scenarios which may reflect when businesses need to consider raising additional debt or equity capital to finance the investment or working capital needs of each business. The amounts of such capital raises relative to what the business may be worth at those different points in time, enabling vcfo to provide its clients with a range of how their equity structure may evolve over time.
Management Reporting Optimization
The US is predominantly, and has been for many years, a services-based economy. As a result, many of vcfo’s customers have most of their operating dollars invested in their labor and labor-related expenses. vcfo assists its customers with determining if a business’ staff is fairly compensated when compared to similar businesses and positions operating in similar regions of the US. vcfo’s HR specialists also examine and recommend changes to business’ employee benefit plans and programs to modify and optimize such benefit plans for the company’s employees while remaining competitive. Further recognizing areas for efficiency in spend, vcfo offers cost effective recruiting solutions to our clients, improving the quality of their hiring process while driving the cost of recruiting down.
Most businesses use a weekly (or sometimes daily) activity level report to track their key performance indicators. Such reports usually reflect a small number of statistics (generally no more than 6-8) to provide a snapshot of performance over a given period of time. vcfo has implemented this type of dashboard-level reporting with numerous clients to provide them with accurate and reliable information to understand at a glance the activity levels in their businesses. Some of our larger clients require more sophisticated support and we have implemented a variety of solutions, including outside ERP solutions, to meet their needs.
We think this is very helpful information for our clients to have, and as part of our virtual CFO services we have secured access to proprietary industry information that enables us to provide clients with comparative financial information. We highlight areas of opportunity where our clients may be falling behind their peers. With guidance by your virtual CFO, focus and attention to these areas can result in enhanced profitability.
We assist our clients with planning and due diligence for all kinds of events including division and entity acquisitions and divestitures. Our finance and HR teams work hand in hand to help with both the financial and human impacts of these transactions. We also support investor partners in their evaluations of opportunities.
I’m considering selling my business in the near future. What activities should I address now to prepare for the sale?
We advise our clients to look at themselves as a potential acquirer would. Take off the rosy glasses and take a hard objective, internal look. If you have enough of a planning horizon, examine your product lines and how they will be viewed in a valuation analysis. Consider shifting your mix or eliminating certain operations to boost profitability or other key metrics that will factor into your valuation. A virtual CFO can help with this by providing analysis and forecasting support to visualize what you could be with certain changes and how that might affect your potential sales price.
Most businesses need assistance organizing and updating their financial records in anticipation of due diligence requests. Locating, preparing and organizing various items that are commonly requested during this process can be extremely time-consuming and hold up a transaction if you wait until you’re in one to get started. You also run the risk of uncovering something you will wish you had found and fixed earlier. vcfo’s CFO consulting services can assist with anticipating the most common items that will be requested and provide an efficient process for producing these materials upon request.
Put together a solid financial forecast incorporating all of your assumptions. Run variance analyses to develop a range of potential cash requirements and return. Know what you need before you start any serious discussions.
Make sure your goals for your business are aligned with those of your funding source. If you want to grow and hold your business, don’t take funding from a firm wanting a 3-5 year exit. Carefully consider your objectives when planning your raise and match them to the funding sources you consider.
Understand the terms of a transaction in their entirety. This is likely not an area of expertise for most business owners. Get good legal and financial advice and make sure you fully understand all of the terms of the agreement.
No. Think of us as an alternative to the in-house CFO, controller, staff accountant, or bookkeeper you would otherwise hire directly. We are your team and thus not independent. We are not a CPA firm. We do not perform what are otherwise considered independent audits for our customers. We also do not provide tax preparation services. We partner with specialist practitioners to assist our clients in obtaining these services.
The answer varies but many times when manual, labor-intensive processes are increasing within a business, there’s likely a benefit to considering upgrading a company’s current account system. Some clients measure this by the number of excel spreadsheets they have to maintain or the sticky notes outlining variations from standard processes. A common problem, complex revenue/revenue recognition for a company will often trigger examination of a company’s accounting and reporting systems. The need for implementing a new accounting system is usually accepted well past the time of the need. vcfo assists our clients in determining existing and planned needs, developing requirements documentation and managing the vendor selection and implementation of new systems.