Experience on tap: vCFO v advisory accountant

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As technology automates a range of traditional accounting tasks and compliance issues, practices are looking for ways to shift the value add to performance and strategy.

The role of the outsourced and on-demand virtual FD has increasingly come into play, offering to manage financial risk without the fixed cost of a permanent finance director.

“Virtual describes the growing trend to appoint portfolio career professionals who offer their services on-demand,” said Nick Paul of Enprise Group, “as and when clients require them.” But what, exactly, does a virtual FD offer and how does it compare to an advisory-focused accountant? We asked a panel of professionals for their take.

Business first: the right experience

“If you are offering FD services, said Neethu Stephen of Evalua8 Corp, “you should pick a niche. So I would say a FD role is incomplete without industry level insights coming from both technical knowledge and experience working within that knowledge sector.” The logic here is that many experienced virtual FDs come from business first rather than practice only.

For Paul, this difference of experience leads not only to a specific skillset, but also a different viewpoint. “I consider an advisory-focused accountant as someone who prepares advisory reports and compliance and has an outside-in perspective, whereas a virtual FD is a person who has previously held senior FD positions and has experience at a strategic level and has real-world experience to bring inside your business. In short: advice vs real world experience.”

In the broadest terms, this respective emphasis on advice and operations manifests in very different service offerings. Kevin Reed, writer and journalist, said: “We talk about the adviser holding the hand of smaller business, guiding them towards people that can help with employment, tax, finance, supply chain, banking and IT issues. In bigger businesses, some FDs manage all those departments.”

Shapes and sizes: the right fit

This implies that the virtual FD role is actually more applicable to the larger SME. Olly Evans from Bristol-based Evans & Partners agreed: “I think the virtual FD term doesn’t apply well to smaller businesses. Perhaps virtual financial controller would be better.

“Larger SMEs tend to have a part-time FD in some guise or other, but the smaller firms really benefit from a monthly check up from their Xero accountant. We find that clients are too busy or don’t have the skills to look at the financials themselves and just want someone to watch their back.”

Despite these distinctions, Reed concluded that the scope of either role can extend to the point of overlapping: “Ultimately, we often see a FD or adviser taking on a lot more than finance or accounting compliance, with lots of different permutations of responsibility. I'd say that, at its most simple, the two are interchangeable.

“However, a slightly larger or more sophisticated business might use their accountant at a more 'corporate' or detailed level than a smaller business, which may make them seem less of an adviser and more of a board director. Perhaps it just comes down to formality – but I don't see a massive difference.”

“They're pretty much the same,” agreed Della Hudson of Hudson Accountants, “but perhaps with a change of emphasis. We have core advisory products such as a strategic planning day and we would expect to use a range of these in a virtual FD role.”

Instead, Evans redefines the field around how problems are solved: “Advisers or mentors are people who bring the answers to problems. They've got experience in the industry or function they are working in. Coaches, on the other hand, are neutral; they facilitate the process to resolve issues. There's a lot of blurring in between these roles. A mentor might be focused on a sector or function (typically sales) but I think accountants work at a broader level and are more like coaches.”

Delivering value: the right message

Broadly speaking, then, virtual FDs have an industry background and are more involved in operational matters. They look to add value through managing financial risk and streamlining the technological process. Advisory-focused accountants view all aspects of the business and add value through analysis and insight.

Even so, these more general definitions blend into one another. For Peter Horncastle of Agile Accountancy, the explanation is that new services have been somewhat vendor driven so far: “With the rise of business coaches helping business owners improve their performance and cloud software increasingly handling compliance, it's clear that the accountancy profession needs to come up with a viable proposition that shows they can add value. I think it's a useful rebranding attempt.”

The panel agrees that roles such as virtual FD can add significant value but, as Neethu Stephen said, it is vital to pick a niche. With this comes the necessity of a clear brand message for the service on offer, so that clients know what they are buying and why it should matter to them.

About Richard Sergeant

Richard Sergeant

Specialist insight and business development support for accountants and their vendors. Cloud advocate with a pragmatist eye.

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