CFO On Call - Why Hire A CFO When Outsourcing Is At Least 30% Cheaper

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CFO On Call Why Hire A CFO When Outsourcing Is
At Least 30 Cheaper
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Indian companies, small and big, can now have a
chief financial officer on call to do anything
from accounts to company law, strategy to fund
raising, report Arijit Barman Biswarup Gooptu
http//mycfo.in
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In April 2013, Deepak Narayanan received an
urgent call from Amit Dalmia, an operating
partner in marquee private-equity firm
Blackstone. A massive churn in the finance
department of Gokaldas Exports, a Blackstone
portfolio company, had seen many key exits.
Critically, this included the financial
controller, just before Gokaldas was to finalise
its quarterly numbers.
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A stranded Dalmia wanted Narayanan and his
colleagues from MyCFOwhich provides chief
financial officers for temporary assignments to
help in the audit closure. Over the next five
months, MyCFO did that, and more, in Gokaldas it
also cleaned its management information system
(MIS) reporting, data entry and inventory
handling.
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MyCFO had also prepped up another Blackstone
investee company, speciality fragrance maker SH
Kelkar, prior to the fund investing Rs 243 crore
in 2012. The Kelkar assignment stretched for four
years predating the investmentone of the longest
for the six-year-old firm that Narayanan, a
chartered accountant by training, had formed
along with his first cousin S Venkat, another
finance specialist and a former CFO himself.
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Again, the engagement was deep and varied,
spanning business cycles. "Till 2009, they were
involved like a full-time CFO till the first
round of external funding and even played an
active role in due diligence at the time of
getting our first PE investor," recalls Kedar
Vaze, managing director of SH Kelkar.
"Thereafter, for two years, they did several
projects, including implementation of Oracle ERP
for our chemical business and assisted our
professional CFO, who had come from HUL, in
building budgets and designing MIS. In the run up
to Blackstone's investment, they also helped
prepare the data room for KPMG to do an audit and
diligence."
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A virtual CFO is, today, a reassuring reality for
all kinds of companies. For bite-sized
entrepreneurial endeavours, such outsourcing is
about addressing a function that is, given their
state of business, neither a priority nor a
prudent full-time spend. For familyrun
businesses, it's a route to test the waters of
professionalism. Even mid-tolarger sized firms
are tapping external brain trusts to execute
focussed assignments, a case in point being
Hindustan Unilever using their services to rank
its distributors on various parameters."
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What's In It For Companies
About a dozen such on-call counsellors have
sprung up in the last few years, offering a host
of C-suite services. There is MyCFO and CFO4U in
Mumbai, Amplus Consulting and Alamak Capital in
New Delhi, and Inspace Consulting in Chennai.
Even some traditional accounting firms have
diversified into this space. "While demand is
still less compared to the west, it's been
picking up here as well," says MK Tyagi, partner
at Bangalore-based MK Tyagi Co.
Outsourcing is at least 30 cheaper than hiring
an experienced full-timer. MyCFO's retainer fees
ranges from Rs 1.5 lakh-7 lakh a month, with
20-25 of it linked to milestones. Typically,
such engagements are for time-bound projects.
While the sweet spot remains six months to a
year, occasionally, they continue for longer,
stretching to up to four years.
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The initial drills of doubling up as the in-house
finance controller with traditional accounting,
MIS reporting, compliance and tax advisory have
also evolved. Increasingly, CFO consultants are
playing a change management role, plugging into
issues CEOs grapple with fund raising, strategy,
treasury, business process improvement and
supervising corporate governance standards.
For PE or VCs, they are must-haves in their
Rolodex to scale up and streamline portfolio
companies, especially in the first 100 days. For
example, after investing in Sahyadri Hospitals,
IDFC PE and the chain sought assistance to
benchmark finance and accounts with best
practices and to redeploy resources for better
output.
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Often, freshly acquired Indian JVs or
multinational subsidiaries seek interim CFOs for
post-merger integrations or a one-time rebooting
of the finance function. "From playing a role in
restructuring an organisation to preparing it for
an IPO, or even steering it through mergers and
acquisitions, we become the conduit between
finance and accounting and the promoters," says
Rajesh Mittal, founder and MD of Alamak Capital,
a two-year-old boutique investment bank that also
provides CFOs to companies while paraphrasing
strategic responsibilities. Alamak's roster
ranges from fledgling firms to midtier businesses
with a Rs 1,500 crore turnover.
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