CFO Service

Can VCFO services be considered for an MSME?

MSMEs are the backbone of the Indian economy due to its contribution to the socio-economic development of the country.  They have gained increased recognition, and many economic and financial reforms have been introduced for this sector. MSMEs require managing funds and its utilization therefore, a CFO or Chief Financial Officer can help in this regard. In this article, we shall know if VCFO services (Virtual Chief Financial Officer) can be an option for MSMEs.

Who is a CFO?

CFO or Chief Financial Officer is a part of the top management of any organization. The primary role of a CFO is to provide professional advice, manage financial risks, financial reporting, compliances, taxation, and records keeping.

CFOs are hired by organization for better management and utilization of funds which can only be done by an expert like CFO.

VCFO services for MSMEs

An in-house CFO can assist companies in navigating and becoming financially strong, most of the Micro, Small, and Medium Enterprises can’t afford to appoint one. Therefore a virtual CFO with his vast knowledge and team can provide expert services and that too at an affordable cost.

Virtual CFO may not be there on-site at all times but would be there when you need him. Especially in times such as these (Covid-19), a virtual CFO can protect you from financial crises. They can take care of the financial health of MSMEs and also permit them to focus on their core businesses.

How can VCFOs assist MSMEs?

A good virtual CFO can help the business by taking care of the following services:

• Accounting and bookkeeping;
• Taxation part like Income Tax, GST, etc.;
• Company law;
• Compliances;
• Preparation of financial statements and management of records;
• Banking services;
• Cash flow forecasting and budgeting;
• Miscellaneous services.

Let’s discuss each of these services briefly.

Accounting and Bookkeeping-

It is critical to perform accounting accurately with all tax laws considering the complex and timely legal requirements. One can always look to an in-house expertise to look after this, but having a Virtual CFO allows you to take the guidance of the CFO service to select and conform to the accuracy of the data entered, set up systems, monitoring, and reporting.

Taxation part like Income Tax, GST, etc-

There are small business owners who are unaware of the fact that their daily decisions impact on their taxes one way or the other. Here they miscalculate and end up paying huge amount of taxes, interest, and even penalties. Help from the virtual CFO service can help in growing awareness regarding the matters pertaining to your current tax status and tax implications of your decisions.

What is more appropriate? To be aware and cautious in time or getting hit by the unexpected tax at the end of the year. Obviously, you know the answer here.  They can assist you in reconciliation of 26 AS or GSTR 2A -3b. Further, they can also assist you in tax planning and savings also. The timely and appropriate reply to various notices received from the tax departments^[1] would also be ensured.

Company law-

All advisory and compliances pertaining to company law can be provided by the Virtual CFO.

Compliance-

These days there are heavy penal charges for filing of incorrect returns/forms and even if you don’t comply with the legal requirements in a timely manner. Compliance is a basic service that is provided by the Virtual CFO. It helps your business to complete all necessary legal requirements in a timely manner in accordance to the latest provisions under various Acts like Income Tax Act, Companies Act, etc.

Preparation of financial statements and management of records-

The virtual CFO can assist you with preparation of financial statements and management of records. Financial statement such as profit and loss statement, balance sheet, and cash flow statements would be prepared. The preparation and evaluation of the statements are done on a monthly or weekly basis according to the requirements of the management.

Banking services-

A business has highs and lows in terms of sales and cash flow, but convincing statements allow businesses to get loan from banks even at a time of a downturn. One can bank on their virtual CFO for such banking services.

 Cash flow forecasting and budgeting-

In order for you to take the correct business decision, better understanding of the cash position at a target period is the key. The cash flow forecasting services of virtual CFO helps you know how much extra fund is needed for a certain project and in making cash arrangements for a timely execution.

Miscellaneous services-

Your virtual CFO also provides you with miscellaneous services such as Cost management, break-even analysis, debt planning, audit report, MIS reporting, and internal controls. 

From the above points, one can easily deduce that having Virtual CFO can help business owners to bridge the gap between finances, operations, etc., to help the business owners to take affirmed and strong decisions. They are expected to keep and lend a high level view of organization in order to create a sound financial base.

Conclusion

MSMEs are small scale organization which needs timely availability of funds, and its proper management is exceptionally essential for its long run sustainability and success. Therefore hiring the VCFO services can prove to be an effective decision.

Read our article:10 Habits practiced by Effective CFOs