Virtual CFO for NBFC

We at Enterslice are equipped to provide NBFCs a virtual chief financial advisor (CFO) facility to monitor an NBFC and its growth. The Small and Medium Scale NBFCs cannot afford the cost of an onsite Chief Financial Officer due to high fees. Management of Loan Products Measuring and Mitigation of..

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Overview of Virtual CFO for NBFC Services

With advent of the concept of Virtual CFO, small businesses now receive virtual support that wouldn’t be possible before. The service of a Virtual CFO for NBFS has paved the way for small and medium businesses to avail the expertise in the systematic management of the growth of NBFCs. The services of the CFO differ from company to company as per the requirement and need. However, some services are standard and often rendered to every NBFC who is willing to hire a Virtual CFO for NBFC:

  • It undertakes all the duties of a traditional CFO of an NBFC, but on a part-time basis.
  • Keeps a watch on the financial health through cloud based software technology.
  • Offer financial guidance and insight to the business on the matters related to finance.
  • Give companies back-office functions, including managing account ledgers, depending on the client and their needs.

Often companies that cannot afford in-house CFO prefer to go with Virtual CFO. Organisations deal with many challenges daily in terms of financial aspects, growth, accounting, and management. To curb those challenges, a need arises to appoint a Virtual CFO who can primarily be responsible for managing activities like financial reporting, record keeping and financial risks of the company. Virtual CFO helps meet those challenges effectively by giving financial and professional aid, analysis and support to the management.

Why is Virtual CFO for NBFC needed?

The position of the CFO in a business enterprise is often considered most significant as they function beyond compliance and quality control to business planning and process adjustments and act as a strategic partner to an NBFC. The services of Virtual CFO can be a boon for growing companies and business start-ups as they can be hired at any stage of the business and significantly impact corporate strategy for growth.

Virtual Chief Finance Officers develops, implements, and controls the lending strategy management of NBFC. The Virtual CFO for NBFC is responsible for maximising the return on investment while utilising the financial resources in cost-effective manner.

Essential Function of Virtual CFO for NBFC

Some Important roles and responsibilities of the Virtual CFO for NBFC are mentioned below:

Risk Management and Mitigation

One of the foremost responsibilities of a CFO is Risk Management; a VirtualCFO creates a line of protocols for resilient defence mechanism and have a complete oversight for managing risks and mitigating the same before it because any potential harm. Due to dynamic and face-paced digital innovations, expanding regulatory compliance has increased the number of risks and can impact the growth of an NBFC.

Virtual CFOs are involved in managing risk for any NBFC in a certain area, which are the following:

Financial Risk

No business is risk-proof; risk in day to day business functions can't be avoided. There is a Compliance Risk where NBFC are required to adhere to the tax compliances and company laws and must follow the guidelines issued by the Reserve bank of India in letter and spirit. Financial risk also includes several forms of Debt Risks, as NBFCs are involved in the role of lending, which makes them prone to the creation of non-performing assets due to higher no. of defaults. Virtual CFO for NBFC saves companies from failing due liquidity crises by managing the regular cash flow issues. The Virtual CFO also reviews the contracts and access the risk related to the mergers and acquisitions which are essential for the growth of NBFCs.

Operational Risk

An organisation is not immune from the risk related to the operational functions of the NBFCs. The risks are related to the expansions of business enterprises, supply chain management, data protection, and quality of labour. The virtual CFO is also involved in discussions and decision-making related to recruiting employees in view of prevailing market conditions. The mandated regulatory compliances have to be put in place to have smooth functioning.

IT Risk 

The breaches in organisation security protocols are regularly increasing and negatively impact the image in the market. Most companies are unable to handle the IT functions due to high infrastructure costs and are outsourced. The Virtual CFO plays an integral part in keeping the data of clients, business partners, and plugging gaps over breaches by working in tandem with IT professionals.

Other Miscellaneous Risks

If catastrophic and geopolitical risks are not identified or managed properly, they can be dangerous and has to beminimized for the proper functioning of the organisations. Either CFO or Virtual CFO should never exist in isolation from the rest of the organisation as they are tasked with managing and mitigating risk.

Supervision and Planning

Virtual CFO givesfinancial  direction based on the analysis and need of the NBFC . An appropriate financial planning  create potential for growth of the business. With this, administration can concentrate on the critical zones without contemplating the budgetary issues.

Budgeting-Virtual CFO administrations adopts standard budgeting procedure . Budgeting is done with the aim to keep the track of all the operations business is performing. Spending should be explored month-to-month or quarterly, so changes can be made to meet the end goal.

Audit Support -Start to finish audit support is given by the virtual CFO by resolving questions asked by the auditors.

Debt Planning -A virtual CFO prepares a standard debt plan intending to accomplish the ideal objective. An appropriate debt planning plays a significant part in meeting the obligation.

Year-End Accounts Closure and Filing-Virtual CFO guarantee the drafting and filing of financial statements at sheduled time . It additionally guarantees the Income Tax Return (ITR) Documenting, GST return filing and other related compliances.

Compliances of the Various Acts- Under this, start-to-finish arrangement will be offered by the virtual CFO as per the provisions of Companies Act 2013, FEMA, Income Tax Act 1961, Contract Act 1882, GST Act 2017, IPR laws etc.

Accounting Policies and Procedures

Accounting Functions

Accounting services is a model that helps evaluate NBFC's monetary bookkeeping status. Here, an accounting health check signifies a total evaluation of the budgetary and accounting part of the association. For this, a prominent team of experts in the administration are required to set up extensive framework for identifying with the bookkeeping practices, for example, planning of information and other accounting policies.

Planning different policies and executing key ideas are required to have a standard account check. In this procedure, legitimate guidance pertaining to annualturnover, benefit, operational and bookkeeping frameworks, and key execution markers are examined and assessed. The business structure, tax proficiency, and development forthcoming are likewise considered in the accounting health check.

Cash Flow Forecasting and Cost Management

Virtual CFOs forecast cash flows in the NBFCs. An NBFC must better understand their cash flows for decision making and meeting future commitments. It helps in making choices concerning the requirement of funds.

Cost management is a procedure under which a Virtual CFO makes a legitimate want to limit the organisation's expense. Virtual CFO helps in improving  the working productivity. The virtual CFO breaks down a variable expense to control it.

For a far-reaching structure of interior control in the association, a very much planned and appropriately maintained system of accounting policies helps upgrade the organisation's responsibility and consistency. Accounting policies and methodology help plan and use well-defined accounting and management in the organisation.

AI Inclusion- Cloud technology is taking over traditional accounting methods and also tends to reduce  the basic expense for services related to finance  accounting. Firms who are epressively using cloud technology to manage their finance and accounting departments tend to be more productive and efficient.

MIS Reporting-A Virtual CFO is responsible for timely reporting of precise and accurate data related budgetary health of an NBFC in MIS (Management Information System) reports.

Internal Control-A legitimate direction in regard to the development of the organisations by method for streamlined interior control framework helps in proceeding with unwavering quality of the association. An appropriate and precise bookkeeping record informed money-related decisions, and monetary detailing are required to make the internal control framework more viable.

New Product Development

In a highly competitive market, CFOs can be key differentiators between the success and failure of an NBFC. A virtual CFO plays a critical role in making strategies related to enrolment and the effectiveness of NBFC’s New Product Development process.

Expansion and Growth Strategy

Virtual CFOs have the expertise and leadership skills that enable them to remotely assemble a successful finance lending and accounting team as per the needs of an NBFC. For example, appointing an AML Compliance Officer with defined roles and responsibilities. A successful expansion and continuous growth can be experienced organically, through Mergers&Acquisitions, or efficient management of NBFC's finances. A Virtual CFO helps find potential investment opportunities and use NBFC funds efficiently.

Benefits of Virtual CFO for NBFC

Some of the benefits of availing services of Virtual CFO for NBFC are as follows:

  • Virtual CFO delivers services to its customers through a team-based model.
  • Virtual CFO assigns a dedicated and experienced CFO consultant to support and deliver solutions to each customer.
  • Virtual CFOs deliver the collective experience of our entire team of resources to their customers.
  • Our customers often benefit from accessing the knowledge, best practices, and best-in-class solutions developed and shared by the entire Virtual CFO team.
  • Similarly, Virtual CFO for NBFCs often benefit from our accounting team approach by being able to access Virtual CFO resources that may have lower billing rates (such as Consultant Controllers, Assistant Controllers, Financial Analysts or Staff Accountants)
  • Through Virtual CFO’s team-based services approach, NBFCs will get the benefit of specialized and flexible levels of experience and support for wholesome management, NBFC should be paying only for the time when services are required at a blended, cost-effective rate.

Risk and resiliene maintain the momentum of your NBFC plan by getting insight into the linked dynamics creating challenges to your NBFC, so you can prepare to minimise weaknesses and dangers to your NBFC’s resilience.

Frequently Asked Questions

RBI has deregulated interest rates to be charged to borrowers by financial institutions (other than NBFC- Micro Finance). The rate of interest to be charged by the Non Banking Finance Company is governed by the terms and conditions of the loan agreement between the borrower and the NBFCs. However, the NBFCs have to be transparent about the procedures for deciding the rate of interest to different categories of borrowers and must disclose it to the borrower in the application form and communicate through the sanction letter, etc.

Loan to value ratio would be computed at the portfolio level or scrip level.

An NBFC accepts public deposits under a mutual contract with its depositors. In case, where a depositor requests for pre-mature payment, RBI has prescribed Regulations for such an eventuality in the NBFC Acceptance of Public Deposits (Reserve Bank) Directions, 1998 wherein it is specified that NBFCs cannot grant any loan against a public deposit or make premature repayment of deposit within a period of 3 months (lock-in period) from the date of its acceptance. However, in the event of the death of a depositor, the company may, even within the lock-in period, repay the deposit at the request of the nominee/legal heir / joint holders with the survivor clause only after submission of relevant proof, to the satisfaction of the NBFC.

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