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Role of Virtual CFO in an SME

Virtual CFO

SMEs are playing a very important role in the Indian manufacturing sector and providing a platform to the businessperson which as a result helps in the economic growth of the company. Due to its significant contribution, SMEs occupies a very important position in the economic sector in terms of output and export. Now-a-days SMEs are the biggest employment -providing sectors after Agriculture and forms a major part of India’s industrial base. A CFO enables business owners in taking an informed decision. The function performed by the virtual CFO is as similar as Full-time CFO.

What are the SMEs?

SMEs are governed by the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006.To avail the benefit of SMEs, it is important to register the firm under the act. SMEs contribution towards employment generation is significant and also provides livelihood opportunities by promoting entrepreneurship.

Who can apply for SME registration?

All classes and sectors of enterprises mentioned below can apply for the registration-

  • Trading,
  • Hindu undivided family,
  • Service or Manufacturing,
  • Co-operative society,
  • Partnership firm Proprietorship,
  • Association of persons,
  • Company or Undertaking.

After SME registration respective enterprises get qualified for availing the benefits provided under the Act.

What are the Benefits availed by the SMEs?

After getting registration under the MSMED Act 2006[1], the enterprises can avail various benefits like –

  • Availability of Easy finance from Banks
  • Preference in acquiring Government tenders,
  • Stamp duty and octroi benefits
  • Concession in electricity bills
  • Timely receipt of payments from the buyers or debtors.

Role of SMEs in the Present Scenario

SMEs are playing a vital role in the large local manufacturing sector and as asupplier to global manufacturers. A part of SMEs is also investing in R&D in order to survive in the competitive market and has contributed about 7% in India’s GDP. In addition, SMEs are also dealing globally by acquiring foreign countries as a part of their globalization process with all the growth strategy. The government of India has always taken initiative by implementing various policies and initiatives to support the SMEs.

Who is CFO?

A CFO is a senior executive person responsible for the company’s present condition in financial terms and managing the financial actions of the company.

The whole responsibility lies on the CFO to decide how and where to invest the company’s money and to oversee the capital structure of the company. The CFO is treated as the treasurer who is responsible for managing the company’s financials.

Note – CFO is the top-level financial advisor and controller which handles all the matters related to cash flow and financial planning and oversee the taxation issues of the company.

Who is the Virtual CFO?

The company who has not appointed the in-house Chief financial officer can opt for Virtual CFO services whose primary responsibility is to manage the financials of the company including (financial risks, financial reporting and,record).

Note – In case of small enterprises, SMEs and startups,it is difficult to appoint CFO, as CFO is a recognized management authority and it is out of budget for small, SMEs and startups enterprises to appoint in-house CFO, in that only case Virtual CFO is required.

What are the functions of Virtual CFO?

Virtual CFO assists the companies by providing the following services to understand the financial capability and health of the business. –

  • Projections of Financial and cash flow through Virtual CFO services by the help of Income and financial statements and cash flow statement.
  • To understand the cash utilization, proper management of cash flow is done by the virtual CFO along with that debtors and creditors management through identification of key operation indicators as it is an important factor to mitigate the risk factor.
  • Virtual CFO helps in budget planning which helps in analyzing the cash requirement and as a result helps in balancing the income and expenses of the company.
  • Forecasting the financial and cash flow projections is the key function performed by the Virtual CFO with the addition that it helps in reducing the wastage of resources and implement such strategy which helps in improving the productivity.
  • To change the organizational structure of the company as and when required to mitigate the risk and to enhance the number of opportunities.

Role of Virtual CFO in an SME

In an SME, the virtual CFO helps the business owners to bridge the gap between finances, operations and strategies to majorly focus on achieving the long-term goals which help the business owners in taking an affirmed and strong decision-making process. a virtual CFO bridges the gap between the finance, operations, and strategy that helps the business owner to focus on long term goals.


Functions of Virtual CFO in an SME

  • To ensure and oversee the financial or accounting team that the profit figures provide a true and fair reflection of the company’s performance for Aparticular period
  • To ensure better management and planning for the next financial year by maintainingthe balance sheet records all the assets and liabilities of the company.
  • Keeping a check on the internal controls, as SMEs usually suffer from the deficit management and organizational structure which is a sign of weak internal control. It helps in providing a true and fair position of the company’s performance for a particular period.
  • As they are expected to maintain and lend a high-level view of the organization and the business environment to create a strong financial base and are also responsible for setting up a strong financial base of the company that plays a vital role in the overall organizational success.
  • They are expected to enhance and maintain a cordial-relationships with the leaders of the organization to create and fulfill a common vision.

Note – The leadership team is limited to business owners/partners in case of an SME, as a result, to increase functional effectiveness and minimize overall expenses, a Virtual CFO is expected to perform various functions such as HR, Information Technology, payroll, etc.

  • In a SMEs, where competition is cut-throat and access to capital is limited. A virtual CFO can help business owners in improving both top and bottom line revenue figure. A Virtual CFO offers SMEs opportunities to open up new markets and propel growth.


As Virtual CFO in an organization helps the SMEs in financial advisory, cash flow forecasting, Budgeting, Accounting policies and procedures, internal control, debt planning and corporate governance. Virtual financial services also help in focusing on the other business activities of the business.

Also Read:
10 Benefits of Outsourcing Accounting Services
What is Account Receivable Services and why to choose?
Cash Flow Forecasting in Financial Model

Narendra Kumar

Experienced Finance and Legal Professional with 12+ Years of Experience in Legal, Finance, Fintech, Blockchain, and Revenue Management.

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