The end of the financial year (EOFY) is critical for any Australian business. It’s a time for looking back at financial performance and, just as importantly, planning for the year ahead. For many businesses, particularly small to medium-sized enterprises (SMEs), understanding how a Virtual Chief Financial Officer (VCFO) contributes during this period can highlight opportunities for more strategic financial management.
So, what does a VCFO do at EOFY, and how does this differ from your usual accounting activities?
Key EOFY functions a VCFO typically undertakes
A VCFO isn’t usually involved in the day-to-day bookkeeping instead, a VCFO provides a higher level of financial oversight and strategic direction. At EOFY, their input often focuses on these areas:
- Strategic input into year-end tax planning
As EOFY approaches, businesses consider their tax position. A VCFO can work with your business by:
- Reviewing the full-year financial data to identify key trends and assess the overall tax position.
- Discussing potential tax planning strategies that align with the business’s long-term goals and current tax laws.
- Ensuring that any implemented strategies are properly documented and understood from a financial management perspective.
The aim is to provide a strategic financial viewpoint on the tax planning process.
- Oversight of financial reporting for strategic review
Reviewing the YTD performance is crucial as the EOFY approaches. A VCFO contributes by:
- Assisting in the interpretation of year-to-date financial reports to provide business owners with a clear understanding of performance.
- Helping to identify the key drivers behind the financial results, looking beyond the surface-level numbers.
- Ensuring that management reports are useful for strategic decision-making, not just compliance.
- Guiding the budget development for the new financial year
The EOFY naturally leads to planning for the next 12 months. A VCFO assists in making the budgeting process more strategic by:
- Facilitating discussions around business goals and how they translate into financial targets.
- Helping to develop a comprehensive budget that is realistic and aligned with the company’s strategic objectives.
- Advising on key assumptions and performance indicators to track against the new budget.
- Developing and analysing cash flow forecasts
Understanding and managing cash flow is crucial. At EOFY, a VCFO will often:
- Work with the business to create detailed cash flow forecasts for the upcoming year.
- Analyse these forecasts to identify potential risks (like future cash shortfalls) or opportunities (such as efficiently using surplus cash).
- Help the business understand the cash impact of planned activities or investments.
How VCFO involvement can assist your business at EOFY
For a business that may not have a full-time Chief Financial Officer, a VCFO provides access to senior financial expertise when it’s needed. During the busy EOFY period, this can mean:
- Greater clarity on financial performance: Moving beyond just the numbers to understand what they mean for the business.
- More strategic planning: Ensuring that the EOFY process is used as an opportunity to plan effectively for the future, rather than just a compliance exercise.
- Improved financial preparedness: Heading into the new financial year with robust budgets and a clearer understanding of potential cash flow scenarios.
- Informed decision-making: Using the insights gained from EOFY reviews and forward planning to make better strategic choices.
Essentially, a VCFO aims to ensure that the financial activities undertaken around EOFY provide genuine value to the business, supporting its stability and long-term objectives.
If you are considering how to enhance your financial management processes around the end of financial year, understanding the potential contributions of a VCFO can be a useful starting point.
