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The rise of the virtual CFO

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Mike Powell left audit profession in 2002, and ventured into corporate world at JSE-listed tech company BCX for 18 years. He spent most of that time “trying not to do accounting.”

“My idea was always to move out of finance. I wanted to get back into small business because I wanted to work with entrepreneurs.”

While so many accountants see their futures at the top of the corporate ladder, Powell saw his future pointing in quite another direction. The sizzle and agility of being able to work among small and medium-sized companies was the adrenaline rush he needed.

He is part of a new breed of what’s become known as virtual CFOs, or financial guns for hire. They are able to bring high-level financial experience to much smaller companies that would not otherwise be able to afford them. Cloud-based accounting packages, and online tools like Microsoft Teams and Zoom, have opened doors for virtual CFOs like Powell.

Since leaving the corporate world nearly a year ago, Powell joined Health Window in Pretoria, where he spends about 20% of his time as CFO. It dawned on him that with 15 or 20 clients paying R3,000-R4,000 a month each, this was a viable business – and one that is likely to attract a growing number of finance executives fatigued by the pressures of corporate life.

“I bring a huge amount of experience as a CFO in the corporate world which I can put to use among entrepreneurs,” he says. “My Dad had been running an accounting firm since the mid-1980s. He is in his mid-70s and was looking for someone to help him modernise the practice. I joined part-time in April last year, and was blown away with technology like Xero, and cloud accounting.”

One of the first things he did was to migrate one of his father’s customers from Pastel to Xero, which resulted in a massive time saving, reducing the time it took to prepare the monthly accounts from 20 to eight hours.

“With these new technologies an accounting practice can do the work of what used to require 15 or 20 people.

“Ten years ago, small clients couldn’t afford this kind of service. Now they can.”

Where the virtual CFO really enters the fray is providing high level business intelligence – delving deep into the cost structure and, crucially, the profit drivers of the business. It’s this kind of intelligence that bookkeepers seldom provide.

“The opportunity that I see is to build a processing platform – first looking at set of financials and then making a judgment of the quality of those statements. With cloud accounting tools available these days, you are able as a finance person to manage that virtually. For example, I haven’t been into Health Window for 120 days,” says Powell.

There’s an art to getting information accurately and on time. “When I take on a project, I take it to a point where you can rely on that information. Then you integrate that with operational information. The general ledger is limited in the information it can provide. Take for example profit per employee. Once you have that information you can benchmark that against the client’s peers, and that in turn can guide management in steps to take to strengthen or restructure operations to get greater efficiency out of the company.”

In this fast-evolving age of tech tools, Powell sees huge opportunities to create an eco-system of connected apps that almost look like an Enterprise Resource Planning (ERP) system of the kind normally available only to very large companies.

The technology is now making it possible for much smaller firms to get the same deep level data typically provided by ERPs.

“If you can show a 10X return on the bottom line, virtual CFOs will have no trouble getting new clients,” he adds.

“Compliance and tax service are a grudge purchase and everyone has to pay that. What these smaller clients are really looking for is strategic guidance and easily implementable plans to grow company profits. That’s where I am differentiating myself.”