A Chief Financial Officer (CFO) as the name suggests plays a very significant role in managing the firm’s income and expenses, he is responsible for making various decisions related to investments, financial planning, tracking cash flows, taxes, etc. Thus, a CFO’s role is very significant in an organization and he is one of the highest-paid officers because his role is very important for an organization’s success in the long run.

However, organizations with small-scale operations often cannot afford this expertise and as a result, they face various problems related to cash-flow, delayed decision making, inaccurate reporting, etc. Such financial incompetence often causes business failures and in the worst-case scenario their closure.

It is for such organizations that the concept of Virtual CFO comes as a blessing as these enterprises can use all the services offered by the Virtual CFO at a nominal cost without needing to hire a full-time CFO.

I. What is SME?

Small and Medium Enterprises (SME) are manufacturing enterprises and service enterprises that are classified into small or medium enterprises based on the composite criteria of investment in plant and machinery and annual turnover  as follows:

Small Manufacturing and Service Sector Enterprises Enterprises whose investment in Plant & Machinery/Equipment is up to 100 million and Annual Turnover does not exceed 500 million.

Medium Manufacturing and Service Sector Enterprises– Enterprises whose investment in Plant & Machinery/Equipment is up to 50 million and Annual Turnover does not exceed 2500 million.

These industries are primarily engaged in manufacturing, producing, processing activities. They form the backbone of the Indian economy and contribute to the country’s socio-economic development.

II. The VCFO model

Small and medium businesses often reach a point of growth when they need an expert to take big business decisions, handle business strategies and budgets. A Virtual Chief Financial Officer (VCFO) is a financial and operational expert who works remotely but provides all the services of an in-house Chief Financial Officer (CFO). Small and medium organizations scaling new heights can easily avail themselves of the services of a Virtual CFO at a lower cost. With new technologies, internet connection, and advanced accounting tools that make availability of real-time financial data, this Virtual CFO serves to provide the best financial and operational advice.

III. How this integration of Virtual CFO and SME can be leveraged?

A Virtual CFO uses cloud accounting tools and integrates with SME’s financial elements including planning, allocating resources, budgeting, and forecasting. They also integrate well with the firm’s cash and bank accounts to monitor cash-flows. Such integration enables a VCFO to take full control of the SME’s accounting function, understand the business performance, and streamline its accounting process. He can easily monitor cash-flow, review compliances, and analyze the business position by reporting key performance indicators and improve business performance.

IV. The Stages of VCFO and SME integration are:


1. Project initiation          

In this first stage, the VCFO plays a very significant role where the firm drafts its objectives, goals, and ambitions. The VCFO provides an outline of the long-term journey by committing to good governance, sustainability, transparency, and strategic thinking. It is at this stage where the firms along with their VCFO map the project’s journey ahead with well planned time frames and key milestones which the project needs to achieve.

2. Project Financing

The VCFO is primarily responsible for overlooking the finances of a project so that the business goals are achieved. The VCFO understands the project’s financial needs and how it can be met.  VCFO  is the key advisor and provides the right guidance making it easy to avail funds for the project. The VCFO provides support to the finance team to help them use the resources effectively so that they are put to the best use and are not wasted.

3. Project Management

 The VCFO actively monitors the progress of a project and ensures that resources are allocated for optimum utilization. A VCFO’s expertise and skills in project management enable strategic changes in planning for ensuring project profitability. The VCFO plays a very important role in the integration of finances into projects and deriving maximum value out of them. A VCFO’s clear visibility provides insight to identify the right projects, take quick decisions to find remedies for troubled projects, and accelerate investment in successful projects. Since SMEs work on a small scale and have limited resources at their disposal, VCFO actively looks after the finances involved in a project thereby mitigating project risks and boosting organizational capabilities to achieve project success.

4. Financial planning and Budgetary control

Financial planning is important to achieve short-term and long-term business goals. A VCFO prepares a strategic financial plan which evaluates the current business/project operations and its impact on the future financial position of the firm. A sound financial plan reviews historic data and guides a VCFO to implement budgetary controls on various expenses like payroll, taxes, working capital, etc. A VCFO’s expertise in financial planning enhances the operational and financial efficiencies and enables organizations to set achievable business goals.

5. Taxation compliances

Compliance with various tax laws is a complex and continuous process. A VCFO takes on the responsibility of the entire tax planning for the organization. With a regular review of contracts, relevant documents, tax laws, and compliances the VCFO keeps complicated issues at bay. An effective VCFO establishes strong financial controls and reporting which strengthens and supports various tax compliance procedures avoiding fines and penalties.

6. Accounting and book-keeping services

A VCFO’s role is far beyond regular bookkeeping services but with the right guidance and support a VCFO streamlines the accounting function, basic reporting and implements cloud accounting services for accessing financial data and records anytime and anywhere. Regular review of accounting systems and processes by the VCFO ensures streamlined accounts function with correct processes and systems in place.

V. Benefits to SME from such integration:

VFCO and SME’s integration brings numerous benefits, having access to VCFO provides small and medium businesses to use the experience and knowledge and set itself ahead of the competition, some important benefits of this integration are listed below:

  • Cost-Effectiveness
  • On-Demand Services
  • Real-time reports
  • Holistic support
  • Financial planning and budgetary control
  • Risk Assessment and Risk Mitigation
  • Forecasting and analyzing firm capabilities
  • Strategic Vision and Decision Making capacity
  • Revenue and Cash Flow management

Diligen provides sophisticated Virtual CFO Services to our clients. We have a pool of certified and experienced Virtual CFO’s, who use a broad range of accounting services and technology that are beneficial for our SME clients. Our specialized team manages financial affairs which are very crucial for the financial success of an organization while allowing small business owners to focus on their core operations. So, Our SME clients can rest assured about the quality of our services along with a high level of data confidentiality.

Our Virtual CFO services team execute and monitor day to day accounting, fund planning, budget assistance, monthly and annual MIS, payroll management, tax compliances, etc.

SME clients using our Virtual CFO services enjoy a total win-win situation as these services are cost-effective giving the companies a competitive edge over their large-scale competitors. The VCFO services of Diligen bridge the gap between owners’ inadequate financial and accounting knowledge. We provide both short and long-term VCFO services to our clients so that they are not caught with the intricacies of financial and statutory compliances and these are best left at the hands of our experts.

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