What type of services do concierge, virtual, fractional CFOs provide?

 There are different recognized approaches to providing virtual CFO services and there are different potential service offerings within the business lifecycle. Bottom line, based on the client’s needs the deliverables would be catered to allow client’s growth, success and evolvement in the market and industry.

One could choose to focus on industry specific services however there is overlap/redundancy in services among industries; still, we must recognize that industry specific services options can vary significantly.

1. Services provided to businesses in the start-up phase (seed stage) are:

·       Business planning, testing business model assumptions, forecasts and what-if scenarios, fundraising analysis and advisory.

·       Further the concierge CFO could provide for Seed stage — Financial models services.  Common elements of models may include the following: inflows (cash infusions from fundraising, revenue analysis by revenue stream); outflows (start-up expenses, operating expenses, assets required to support revenue stream).

·       Other services in the Seed stage — fundraising analysis and advisory: determining amount of capital needed, bootstrapping, bank financing, equity financing.

2. During the Growth and expansion phase few potential services include the following: building an accounting system, staffing an accounting department, business process automation, cash flow management, margin analysis, financing related services, banking considerations (every business must maintain accurate records regarding bank activities). A concierge CFO could take on projects that encompasses the full suite of services or a la carte.

What is a business without its people?  The employees are the success of an organization so staffing an accounting department is key to be done the right way.  A concierge CFO takes on the role to create or evaluate and reshape and accounting/ finance department.  Some of such responsibilities would be developing role descriptions, assisting with screening, developing processes and role responsibilities.

Further questions to ask when starting or running a business: Does the organization require inventory management? Is the business creating assets with useful lives more than one year?

Are there fixed assets incorporated into the business? Does the organization use credit cards to finance expenditures? If the answer is yes, then the answer to the next question is relevant.  Does the company leverage the best suited technology to support its activities? If you don’t have the right resources available or the available resources are stretched thin a concierge CFO is the right partner to help you navigate in these areas to select and implement the right technology and processes.  

More and more questions to ask. Does the company have debt on the books and does the lender require special reporting such as compliance and covenants reporting? What reports would be of most help to management during the growth phase? Here are ideas to where a concierge CFO can help organizations navigate the needs and deliverables to assist the growing business daily and ongoing requirements so the owners and investors could operate and make decisions based on accurate, clear and timely information.   Such are:

·       Margin analysis: product/service margins, pricing (sell-through), product mix, management of products or services, customer evaluation and analysis.

·       Financing related services: financial modelling, fundraising support and advisory, working capital reporting.

3. Then the concierge CFO could also provide Services to businesses in decline and exit stages. Services during the decline stage are: business process automation, margin analysis, business model analysis, hard- and soft-trend analysis, payment terms analysis, partnership analysis.

·       Margin analysis for: fixed versus variable costs, pricing strategies, product mix and margin.

·       Business model analysis: employer versus non employer, manufacturer and wholesaler versus licensee, contract manufacture versus self-manufacture.

·       Hard- and soft-trend analysis: trends affecting decline, internal or external threats and trends, hard versus soft trends.

·       Payment terms analysis: review customer list, Review vendor list, pull in customer terms, Push out vendor terms.

·       Partnership analysis: vertical, horizontal, smart money.

4. The Concierge CFO could provide services during the exit phase:

·       Exit strategy advisory: planned exit (Sale/Retirement), unplanned exit (bankruptcy, closure)

·       Succession planning: liaison with legal and tax, financial modelling, payouts.

Overall, the concierge CFO could provide services during all stages of the business life cycle and focus on Management and financial reporting, Budgeting, forecasting, what-if scenarios, Cash flow forecasting, accounting operation oversight, Cybersecurity advisory.

·       For Management and financial reporting, the Concierge CFO is trained to address the audience to of the financial reports, answer questions, ask questions, tell the story, use dashboards, targets, and KPIs.

·       For Budgeting, forecasting, what-if scenarios the concierge CFO uses industry and business specific KPI’s to deliver yearly budgets, rolling forecasts, financial modeling and what if scenarios.  

·       In an October 2017 Journal of Accountancy article, one of the most common questions posed by our clients was, “Can you explain the cash flow statement, and how I can generate cash in the business?” That question is still being asked today.  The concierge CFO is versed in putting together and explaining the cash flow for your organization since Cash flow forecasting is most requested type of report (regardless of the business phase), more beneficial for businesses with longer customer payment terms from customers and shorter or pay-ahead terms from suppliers. Unfortunately, accounting software usually is not built to handle an automated cash flow forecasting.

·       At times all organizations are shorthanded. Sometimes at lower level but sometimes at the top.  In times like those a concierge CFO will know how to handle the situation seamlessly and jump in for accounting operation oversight.  This type of services is commonly requested.  In this role the concierge CFO is qualified to align accounting operation with organizations’ vision, identify obstacles to growth and managing and develop the accounting team.

The list of concierge CFO services could go on.  Today I presented a variety of potential services that could be provided by Concierge CFOs. When partnering with a concierge CFO is important to have a clear understanding on what services to be provided and have clearly defined deliverables. Discussion of compensation should be clear, and no assumptions should be made. Defining the scope of the engagement between the Concierge CFO and the organization is crucial and challenging, hence the fact making this point a priority.  A concierge CFO will not review or audit the financial information and will not provide an opinion. The Concierge CFO will not prepare tax returns however could facilitate   coordinating and managing the audit and tax engagements with the third-party auditor and tax preparer.

Lastly, the Concierge CFO   will provide services aligned with AICPA Code of Professional Conduct which summarizes the following: public interest first, act with highest sense of Integrity, objectivity and independence, due care, scope and nature of services specified and documented.

Under the AICPA code — Independence Rule an advisor CFO is not required to be independent but required to be objective (AICPA code – Part 2 Members in Business) and use Integrity and Objectivity, General Standards, Compliance with Standards, Accounting Principles, Acts Discreditable.

 I will leave you with these key points:

·       Large companies and small companies all require concierge, virtual, fractional CFO services, but on a different scale.

·       Demand for concierge CFO services is growing due to technology, lower cost of entry, changes in capital raising structure, changing business models, and business demographics.

·       Normally the client names the needs, and the concierge CFO delivers the solution through a “named” service. The concierge CFOs role is to be a partner and deliver results for the benefit, progress and growth of the organization.

·       Concierge CFOs are subject to the AICPA Code of Professional Conduct, Part 2 (not required to be independent).