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L-R: Glenn Martin, Jo Woods and Reza Hooda present virtual finance director workshop
AccountingWEB Live Expo 2021

Virtual finance movement takes root

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Conversations at the AccountingWEB Live Expo last week confirmed all the recent indications that more and more practices are now offering outsourced finance services.

8th Dec 2021
Editor at large AccountingWEB
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In an Expo session entitled “The rise and rise of the virtual FD”, AccountingWEB contributors Reza Hooda, Jo Wood and Glenn Martin offered nuts-and-bolts advice about how to build a successful virtual finance director operation.

There’s no denying the momentum behind the virtual FD movement. Roughly a quarter of all entries to this year’s Accounting Excellence Awards mentioned virtual FD services. Most offerings were built around outsourced bookkeeping and management accounts, but many extended into other service lines including cashflow forecasting and management, credit control, strategy, growth and funding advice, payments and even HR and company secretarial services.

“Small businesses are crying out for financial information, but they can’t afford it at £1,000 a day for a finance director,” explained workshop host Reza Hooda. “The alternative is to let your accountant manage it, and they can do it all for £25-30k a year.”

The difficulties companies experienced during the pandemic boosted demand for hands-on support. While many traditional accountants resist the cloud-based advisory model that has become such a vogue in recent years, bookkeepers and management accountants like Wood and Martin have been moving in to fill the vacuum.

Virtual FD career paths

After working as a bookkeeper for a marquee company, Wood learned that the things she did to boost profitability and improve cashflow would benefit any business. In particular, she saw an opportunity to work with smaller businesses – including beauticians – who were often scared of numbers and were looked down on by some accountants.

These insights led to the formation of Jo Woods Virtual FD in 2019, where she specialises in supporting SME clients with turnovers as low as £30,000 a year.

Martin’s career path also led from industry into practice as a virtual FD. He cut his finance teeth as a manager in a large Newcastle leisure group, where he learned which levers you needed to pull to shift an organisation towards profitability.

How the process works

Martin confessed at the workshop that the term virtual finance director is occasionally overused by software people, warning the audience: “You don’t just bung a £30 report pack on the back of accounts to provide the service.”

The hands-on approach doesn’t work unless you help clients understand what’s driving their business, he continued: “We spend time on non-financial measures and drill into the live software to see how they impact performance.”

Compliance services are still the gateway to becoming an external finance team for clients, and doing their books and VAT returns for them in the cloud is an essential first step. “If the accountant spots that sales are up or down that quarter, they can start to have discussions with the client about it,” Martin explained.

From these conversational beginnings, clients can be encouraged towards higher value services by creating a business plan based on 4-5 things the business owner wants to achieve. “Reverse engineer that back to what the business needs to do to meet those objectives,” said Martin.

The service package can then expand to providing management accounts and cash forecasts to be discussed with business owners at quarterly meetings to check they’re hitting their targets.

Holding clients accountable

Jo Wood agreed that accountability was a key part of the virtual FD package. “The biggest thing is holding clients to their commitments,” she said. “They know what they need to do. We just hold them accountable for their actions.”

The Expo workshop was notable for the number and quality of questions from practitioners wanting to bounce ideas off the panel. One participant was very interested in the growth opportunity, but like many accountants, he confessed that he didn’t feel very confident about making the move into outsourced finance work.

According to Reza Hooda, “The challenge is in our minds. But if you think about it, you’ve got the skills to do this.”

Glenn Martin explained that it is easier for accountants who have worked in industry to make the transition, because they have day-to-day experience of what goes on in the business.

“Having worked in industry, the skill set is different: you understand the trade and apply that knowledge every day,” he said. Back when he worked in the leisure group he had industry-specific knowledge about the levers he could pull to improve performance. For example, to make a cocktail bar more profitable, he knew where to look for cheaper supplies or how to bring down wastage.

“Every business has 3-4 important figures and if you run the business, you’ll know what a successful operation looks like on the P&L. To be successful as a virtual FD, you need to go into 1-2 industry niches that you understand. Invest in development and upskill yourself to grow the business by attracting new clients and selling more services to existing clients,” he advised.

Look for quick wins

Another question from the audience asked how to overcome client resistance. Rather than trying to convert those who were wedded to their existing processes and systems, Jo Wood suggested trying the model out with new clients, where you didn’t have to put so much effort into changing their mindset.

Rather than proposing a big bang approach, she suggested building the strategy around some quick wins.

“In-house teams can get a bit stale, but what they’re doing can be improved,” she said. “Don’t go in and make wholesale changes. Do one or two incremental improvements each month and go in with something like Dext Prepare so they’re not spending eight hours a day entering invoices into Sage.”

She also suggested practicing what you preach before transforming into a virtual finance practitioner. “Do it for yourself. Be your own best client. How valuable is that for you?”

Once you understand the value can deliver to your own business, you’re in a better place to work out a price that will work for your prospective clients.

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