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'Virtual finance directors' for small business and startups

The emergence of cloud accounting software, Xero in particular, in the small business market has enabled a total game-changer in the way accountants can work. 

Instead of their role being a once a year thing involving visits to clients and face to face meetings etc., everything's available all of the time from anywhere. This, coupled with the related move to real-time accounting (basically, everything kept up to date daily) has enabled accountants to a higher degree, and hopefully better one, get involved in financial decisions to a much greater and more regular extent.

Virtual finance director - virtual Chief Financial Officer (CFO) whatever you want to call it - does sound rather grand. Still, it can extend to little more than assisting with keeping accounting entries up to date and providing key reports regularly, like unpaid customer and supplier invoice lists and profit & loss accounts. 

Moving on, implementing and using features like Xero's Projects which help to drive up profitability by tracking income and costs on individual jobs or projects could be the next step. 

Having help from a virtual FD to get the accounting basics right in turn opens up the opportunity for them to use the various fintech add ons that have emerged over the last few years. Cash flow and profit forecasting are good examples - assistance with online funding applications (including loans) facilitated by direct access to accounting data is another. 

Advisory boards - an idea for small business

Mention the word ‘board’, and I still think of suits, ties, and big tables. Not for the first time, the Startup Therapy podcast from with Will Schroter and Ryan Ruton has changed my outlook on things.

In one of their recent episodes, they discuss in some detail the benefits of advisory boards for startups - I would broaden that out to all new small businesses.

Here’s my take on the key points.

Surprisingly perhaps, there’s no board as such, no need to throw big meetings nor even for everyone to get together at the same time (one to one can work), and it’s definitely not a board of directors style set-up - members are responsible to you rather than the other way around.

It’s simply a group of, typically three to five, people that you pick, people who have extensively more experience than you, who can help with various, potentially very specific, parts of your business journey.

A couple of things, firstly the composition of the board can change over time as the business evolves and faces different issues - they mention a two-year term as a suggestion. The second point is that there’s no need to go for the butcher, baker, candlestick maker style type approach where you try to get a representative from all the main business disciplines. The point made in the podcast is that unless you expect to be involved in endless litigation, for example, appointing a lawyer may be a waste of a seat. Instead, pick people who understand what you are about to go through.

As regards the process of recruiting people for your board, the podcast suggests aiming high and asking established people who can add credibility to your business.

I would perhaps widen that out to say the pool of potential recruits could be much wider and not necessarily big players on the startup or small business space, people you already know, for instance.

At worst, they say they can’t do it, but you still have a potentially helpful contact for the future. And, in any case, people like to be asked!