Carl Tomlinson, virtual FD at vfdnet

A virtual FD is an experienced independent Finance Director who fulfils all the functions of a conventional Finance Director but works remotely on a part time basis rather than as a full-time employee.

A virtual FD brings a skillset into a business that it wouldn’t otherwise be able to afford. A virtual FD is typically hired for between two and four days a month, at a cost of £800-£1000 a day, which enables an SME to access the expertise of an experienced Finance Director for a fraction of the cost of employing them on a full-time basis, which could be £125,000 a year.

Because a virtual FD is an independent advisor and not an employee, they can act as a sounding board and trusted advisor to the owner and challenge them in a way that an employee on a salary might not always feel able to. They are somebody that the business owner really feels has got their back but isn’t going to let them off the hook.

The virtual FD can help the owner of the business understand what they are trying to achieve and then help them build a strategy to enable them to do this. If the business owner is looking to grow the business so that they can sell it, for example, the virtual FD can help them build a strategy to grow their EBITDA to a certain point to achieve the valuation they need. If the business owner wants to make an acquisition, the virtual FD can advise them on how to generate enough cash to be able to do the acquisition, how to ensure that their cash flow is robust, and to decide what kind of acquisition to make.

The role of the virtual FD is to be a storyteller, and to communicate the numbers of the business to people who normally aren’t accountants. They will break the numbers down into metrics which the business leader can influence and understand and can look at very quickly and say well if I do this, that is going to happen. It is about breaking that down into simple tools so that the leadership team can execute the strategy of the business and can see on a weekly and monthly basis, how what they have done has contributed to where the business wants to be.

An ideal time to do this is at an inflection point when the business embarks on a charge that the existing structure can’t accommodate and when the management team needs more than just a set of numbers. This inflection point might be pressure on margins, or cash flow. It might be at the beginning of a phase of growth, or when a large investment is planned. You can usually rely on a diligent bookkeeper to get the numbers together in a reasonably timely manner; what the virtual FD will bring is a commercial insight into those numbers. They will help the business owner and the senior leadership team understand why those numbers look the way they do and what the real drivers to achieve the numbers they would like.

A virtual FD needs to be technically up to date and prepared to remain relevant and professionally astute. They need to understand entrepreneurs and realise that they are people who make decisions quickly and sometimes contrarily. They need to be independent of thought and be prepared to make suggestions and challenge the business owner. They have also got to be able to get on with the wider team (sales, operations, marketing, HR), so that they can help the owner drive the business in the right direction at the right pace.