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Virtual CFO Solution From SuperCFO: The Most Cost Effective Shared CFO Solution For Startups And Growing Companies.

Companies at all stages of their evolution need a strategic financial brain to steer it clear from the stormy waters.  This is more so in the early stage companies. They crave for a sharp analytical mind to help them out in fund-raising, budgeting, financial reporting, cash flow management and ensuring compliance.
It has been observed that more than 40% early-stage businesses shut down due to financial in-discipline. Of course, only less than 20% startup founders believe that they can afford a full-time CFO in their organization. The truth is that the need for a strategic financial “brain” as part of your early-stage team is more imperative than ever. The CFO or Finance Head will ensure that the company keeps running full-steam and thereby help the CEO or the Promoter to focus on strategy to fuel the company to further growth, without being unsure – financially!
If you are a start – up or a small and growing company, hiring a Fulltime CFO would in most cases be cost prohibitive. How do you reconcile to this situation? There is an ever increasing need to make financially challenged companies aware about the growing phenomena of Virtual CFO or Shared CFO services where you can Hire a CFO, at a fraction of the cost that it would take to recruit a Fulltime CFO.
Worry not! SuperCFO has just the right solution for you in the form of a Virtual CFO or a Shared CFO.
Yes – A Virtual CFO. Someone who will never be a liability on your payroll, but always an asset for you and your company. The SuperCFO Virtual CFO’s involvement with your company is calibrated just to the right extent to ensure that there is no bleeding of unnecessary finances for your company. And what more……our Shared CFO brings great experience and skill to your existing Finance and Accounts team at a sharp cost; just when your company needs it the most. So go ahead and Hire a CFO from SuperCFO.

Tips for cost efficiency

Plug those leakages to achieve cost efficiency and savings.

tips-for-cost-efficiencyCost Savings is very important for enhancing Profitability and could be achieved by plugging various leakages in your cost structure while delivering significant results to your bottom-line, without having to implement any cost reduction measures.
Ask yourself below questions to know if you are monitoring your costs well:

1.   Rentals: Did you measure the office you took on rent?

Did you know thatYou could have negotiated good rate per sq. feet, but what if the landlord is charging you for more area than what the actual office space is?

2.  Manpower Cost: Do you evaluate various activities performed by your staff to check if there is any scope for improving efficiency, or eliminating unwanted tasks or automating mechanical processes?

Did you know that: By undertaking Time & Motion study, by evaluating in detail what each one does the whole day, by implementing certain productivity tools and/or by realigning job responsibilities, you could improve employee productivity multi-folds, thereby eliminating the need to hire more and containing manpower costs? Such measures also help in improving accuracy levels.

3. Cafeteria Services: Have you ever compared your guest/employee attendance vs. the plate count provided by your cafeteria services provider?

Did you know that: While you may have negotiated best per plate rate with your cafeteria services provider, you may be charged for unwanted extra plates?

4.   Internet Cost: Are you paying for internet for allowing free movie downloads to your employees during office hours?

Did you know that: With smart internet usage policy, where you could permit personal use of internet after office hours, you could free up a lot of internet traffic, thereby reducing internet bandwidth requirement and corresponding cost.

5.    Car Hire / Conveyance Cost: A lot of employee friendly companies provide door-to-door transportation services to their employees. Are you checking if the car hire company is taking the best route from “distance travelled” perspective OR is he charging you based on the longest route?

Did you know that: There have also been instances of employees producing fake/manipulated bills for car fuel / conveyance cost. Thorough cross checking, strong expense approval process and strict disciplinary action reduces this substantially.

6.   Business Development Costs: How do you know that the Restaurant/Entertainment bills that Business Head just produced are not for his family outing?

Did you know that: There could be leakages in costs and sometimes unwanted costs are incurred if Sales & Business Development teams are not monitored closely and vouchers not checked thoroughly? Companies have implemented simple control measures like asking for the restaurant bill and not just the credit card statement to check the number of guests entertained AND checking if those expenses were incurred on a working day or a holiday.

7.   Telephone Costs: Do you monitor long distance calls made by employees through the company phone number? Do you monitor roaming call costs?

Did you know that: By giving a Calling Card and by monitoring key long distance phone numbers, you could reduce your telephone cost substantially? This also reduces personal calls being charged to company account.

8.  Lawyers Bill: Do you ask for cost estimate from your lawyer, before asking him to work on any matter?

Did you know that: Most lawyers work on time & effort basis? They would charge you even for the telephone call you had with them explaining the matter on hand, as well as for correcting the mistakes made in the first draft document prepared by them. You may have negotiated hourly rates, but always ask them to stick within a budget and minutely review their time sheets to check what you are being billed for.

9.  Banking: Do you have a separate working capital (overdraft) account and a separate current account? Are you efficiently moving money across your various non-interest bearing current bank accounts to your interest bearing Working Capital (OD) account?

Did you know that: By setting-up auto sweep or other manual methods, and ensuring that funds from your current account are moved to your Overdraft (OD) account on daily basis, you could save a lot of interest cost in your OD account?

10. Interest Cost: Are you monitoring the interest rate charged by your bank on the loan you took from them some time back OR do you just pay whatever the bank charges you as interest?

Did you know that: You could miss out on interest cost savings just because your bank did not reduce the interest rate on your loan, while lending rates would have reduced?

Did you know that: If you have been servicing your loan well, and if you feel you are being charged higher interest rate, as compared to what another bank is offering, you could go back and renegotiate your interest rates with your bank? Remember, banks too need good clients.

Other Forms of Restructuring

There are other kinds of restructuring which are self explanatory:

Changes in top management

This means the changes in the top and the operating management in the company. This begins with the change in the CEO and Managing Director level changes to bring in the change driver commensurate with the need of the hour. The “person of the moment” is seen as a key driver of policy changes and mover and shaker by the promoter management and by the market. The team to work under the top person is many times left to his or her discretion. By and large the person brings along a tested team which perhaps has seen a good turnaround elsewhere which does not mean success is guaranteed, but that which could be tried out in the new place. This includes at the Board/operating level and may include heads of profit centers, HR, Marketing and other critical positions. Finance is usually a closely guarded level and the top management may like to bring in someone from within the loyal group of professionals.

Retention of key management team

There are also instances when some people are considered indispensable and their retention in the company is absolutely required. Such persons are retained in the company by paying the stay on bonus in cash or in the form of stock options. This will give significant motivation to persons for continuing in the organization and be a part of the changing environment.

Moving of operations such as manufacturing to lower-cost locations

In late 80’s and early 90’s the set up in various companies used to be “fractured infrastructure”. The Corporate Office set up will have Marketing, Procurement, Finance, HR apart from the usual corner office paraphernalia. The plant correspondingly would have the functions such as Sales, Purchase and stores, Accounts, Industrial relations, etc performing some parallel or even overlapping functions. Leaving a small set up for the Corporate office, MD and associated functions, it was found to be productivity and cost effective by combining functions in one location for cost saving, better plant management and effective customer and plant relations. Moving plant locations have also been done in the past to improve proximity to the raw-material and customer market, better availability of power etc.

Conclusion:

Restructuring is a process and involves careful planning and application. The company can phase the restructuring process say over a period spanning 6 months to one year giving time for observing the impact of the restructure across the entire business. The costs and productivity being important, it is also necessary to keep the interest levels of customers and motivation of employees alive. Many restructuring has resulted in panic among these sections resulting in the flight of customers and key employees. The new of restructuring will therefore need to be timed out and suitably explained as it happens.

Other Forms of Restructuring

 

There are other kinds of restructuring which are self explanatory:

Changes in top management

This means the changes in the top and the operating management in the company. This begins with the change in the CEO and Managing Director level changes to bring in the change driver commensurate with the need of the hour. The “person of the moment” is seen as a key driver of policy changes and mover and shaker by the promoter management and by the market. The team to work under the top person is many times left to his or her discretion. By and large the person brings along a tested team which perhaps has seen a good turnaround elsewhere which does not mean success is guaranteed, but that which could be tried out in the new place. This includes at the Board/operating level and may include heads of profit centers, HR, Marketing and other critical positions. Finance is usually a closely guarded level and the top management may like to bring in someone from within the loyal group of professionals.

Retention of key management team

There are also instances when some people are considered indispensable and their retention in the company is absolutely required. Such persons are retained in the company by paying the stay on bonus in cash or in the form of stock options. This will give significant motivation to persons for continuing in the organization and be a part of the changing environment.

Moving of operations such as manufacturing to lower-cost locations

In late 80’s and early 90’s the set up in various companies used to be “fractured infrastructure”. The Corporate Office set up will have Marketing, Procurement, Finance, HR apart from the usual corner office paraphernalia. The plant correspondingly would have the functions such as Sales, Purchase and stores, Accounts, Industrial relations, etc performing some parallel or even overlapping functions. Leaving a small set up for the Corporate office, MD and associated functions, it was found to be productivity and cost effective by combining functions in one location for cost saving, better plant management and effective customer and plant relations. Moving plant locations have also been done in the past to improve proximity to the raw-material and customer market, better availability of power etc.

Conclusion:

Restructuring is a process and involves careful planning and application. The company can phase the restructuring process say over a period spanning 6 months to one year giving time for observing the impact of the restructure across the entire business. The costs and productivity being important, it is also necessary to keep the interest levels of customers and motivation of employees alive. Many restructuring has resulted in panic among these sections resulting in the flight of customers and key employees. The new of restructuring will therefore need to be timed out and suitably explained as it happens.

Equity Restructuring

Here is an interesting restructuring process. Equity restructuring in its broadest sense may mean any transaction between the Company and its shareholders, such as issue of rights and bonus shares, issue of preference shares, IPOs, PE/VC funds, dividend on shares, stock split, spin-off, that affects any class of share holder or the share price. The issue of rights and bonus shares involves change in the capital structure either for cash or through capitalization of reserves in case of rights and bonus shares respectively. The right to equity dividend may get altered with the preference capital coming in where the preference shareholders will get priority over the equity shareholders with reference to payment of dividend and repayment of capital. Similarly share splits and spin offs radically restructure the capital base of the company and also may provide opportunity for holding shares in other companies.

One of the kinds of capital restructuring is capital reduction schemes made by certain companies in the past under section 100 of the Companies Act 1956. This interalia includes among other things setting off the carry forward losses that the companies may be carrying in the balance sheet against any share /stock premium or unused specific reserves in the balance sheet in order to present a correct picture of the net worth of the company. While the bankers may in any case be adopting this practice, it is for the shareholders to get a correct feel of the real financials companies in the past have resorted to this practice. Several companies have done this in the past. It is however a very involved process which includes certain court procedures.

Companies that have smaller debt compared to their net-worth are underleveraged or have a low gearing ratio. Such companies are either cash rich and have limited or no external debt needs for their operations. Such companies may also not have any major growth plans for which they will need the money. These are conservative corporates who are shy of borrowing for various fears of parting with their assets as security, or providing a berth on the Board for directorship for an external person or predominantly family run concerns. Such companies may adopt a strategy of buy back of shares. This means there will be fewer stockholders to satisfy and pay dividends to. Converse to the situation is where the company has profitable projects in the near future. There is thus an opportunity for raising debts by leveraging equity. There are certain debts like institutional debt with convertibility clause and issue of convertible debentures/preference shares that will affect the equity base of the companies.

Restructuring Operations

Simple as it may sound, the challenge is in implementing or executing the plan. The restructure may involve optimization of production, improvement in processes with uncompromised quality and productivity measures, cutting frills in the cost, improved turnaround time through better time and motion methodologies (even requiring relocation of production facilities in a factory or different locations), rationalization of workforce etc. Apart from the improvement in productivity taking on competition, price re-adjustment, customer retention and improvement in market share etc. also forms an integral part in any operations restructure. Any successful turnaround will have to address all or most of the above operational concerns.

Optimization of production will involve a diligent production planning process based on schedules provided by customers in a manufacturing company or the final sale order received. The planning process may involve certain out of the schedule manufacture also but one needs to take care to see that the inventory does not go beyond the prescribed norms. Defining the stocking and reordering norms taking into account the lead time in supplies, together with resorting to just in time supplies for high cost but low lead time materials etc can help in better inventory management, thereby reducing the carrying costs and improve working capital management. Disposal of slow/non moving stocks and stores also can release the mush needed cash for working capital.

Planning capex for volume increase for attaining economy of scale, or for adopting a contemporary state of the art technology or forward or backward integrations for cost savings can also restructure the desired operations. Similarly the process improvements other than the technology purely from the point of view of better utilization of resources and time management can also improve operations, reduce costs and make the company compete better.

Strict quality adherence, coupled with “on-time” delivery whether in manufacturing or service industry will enable company to improve its market image. Whenever the company is in a position to save costs, it can pass on part of the cost savings to the customers through price readjustments thereby retaining the customers or increasing the market share.

Operational restructuring, may also involve downsizing, eliminating staff to reduce costs. Changes to corporate workforce bring in rationalization of human resources. The elimination of non essential activities from the company by outsourcing the requirements and introduction of automation in various spheres of the company’s activities may result in surplus workforce who can be redeployed for other activities or provided exit options through a golden hand shake scheme. A manufacturing company near Mumbai had a total work force of 2500 , for a manufacturing activity which was almost more than 100% of its requirement on a recently semi automated plant. On a close scrutiny it was found that the company had on its rolls tailors for stitching the plant uniforms for workers, cobblers for making and mending the workers’ shoes, repairs and maintenance staff and the canteen workers. There were also more people in the plant than what was necessary for a semi automated plant. The management realized that while most of the frill activities could be saved by outsourcing the facilities, a little more capital expenditure can make the plant more efficient and less people dependent. The company adopted this new thinking and was able to reduce the total work force to about 1300 and was able to show higher productivity and profitability, through lower costs and improved market share.

Many times there is a mismatch between what the customer actually wants and what the company perceives is their need. Surveys do help to fill the void. Many companies with the help of professionals have devised methods which have been adopted with reasonable success. The weight ages assigned for various customer satisfaction parameters results in a score which is compared with the standards to determine the index of satisfaction. Improvements based on the results of such surveys are helping the companies improving the servicing to the customers. Similar employee surveys have proved to be eye openers to the HR for knowing exactly the pulse of the employee satisfaction that can trigger productivity.