What is The Role OF The CFO in MSME?

What is The Role OF The CFO in MSME?

MSMEs are playing a pivotal role in helping India achieve its $5 Billion GDP target, as said by economists. 

What makes these MSMEs so important to India's economic value? Who are CFOs? How can they help a company get better in market performance? This blog post answers all those questions and how CFOs shape a company to its highest potential.

What are MSMEs?

MSMEs are expanded to Micro, Small, and Medium Enterprises. MSME sectors use the greatest number of people in the country. They are the economy's lynchpins, providing fair benefits and development to all.

Amassing a great deal of national importance, the Government provides them utmost support. They are eligible for lower interest rates and exemption schemes. They are also subsidized for resources, capital, and excise duties.

With defining MSMEs out of the way, let's lend our focus on who a CFO is and what will be such a person's role.

Who’s a CFO?

Taking strategic decisions, assessing legal and economic risks and being informed of compliance and taxation. 

That person who performs all these activities is the one you call a CFO or a Chief Financial Officer. 

The CFO takes profitable decisions for a company. They handle and organize the company funds. A quality CFO ensures the organization of better management and usage of funds.

Different roles a CFO performs

As pointed out earlier, a CFO manages the financial aspects of an enterprise. They help the owner take risk-based decisions. Its primary job is assessing its performance, potential, and current cash flow. 

Such a person takes healthy decisions towards capital management and enterprise valuation. 

A CFO has a critical role in helping the business owner build a sustainable business. Such a business makes possible regular cash flow and later profit increases.

The CFO ensures an errorless operation of the company. A CFO assures a quality accounting function with high-detail attention and cross-referencing. 

They will be free from errors derived from tax laws and legal restraints. They make it clear that accounting is the key to the prospective evaluation of the venture.

Speaking of tax laws, the CFO makes sure that the establishment is aware of the repercussions. 

They help them optimize such decisions to governmental tax requirements. A company lacking a CFO might misestimate taxes and encounter penalties. Heavy penalties and taxes on a company disturb its ROI.

Here is another such case where the services of a CFO are imminent: the penal charges for invalid returns. 

Non-compliance is a serious affair; it affects your company’s reputation. You'll find your company down its performance in the market. 

In such a case, a CFO, if present, will assist with operations that can link up with compliances. 

Proper maintenance of records and financial statements is another important affair. For an establishment, these serve as official records. 

They are viable to statements and decrees from Government and Stakeholders alike. A CFO handles organizing records and their timely updates. They are also responsible for preparing and evaluating statements and balance sheets.

One might find themselves in the position of asking for a loan from a bank. At such times, you'll need to put up convincing arguments even if your market performance is bad. 

At such times when a company is experiencing a volatile market performance, a CFO comes in handy. 

They can put forward well-maintained statements that might resonate with bank officials. In this way, you might even score a loan even at your market downtime.

The most important service by a CFO now is the cash flow assessment and budgeting. The owner always needs to make risk-based decisions. 

They will be investing the cash flow in areas with reasonable benefits in the short term. They might even choose risky areas with long-term benefits. 

In this case, a CFO helps the owner take the best decision according to the current financial status. 

A CFO makes the cash flow assessable and predictable. Their analysis of the market situation and professional needs is essential. This operation by a CFO helps in the timely allocation of funds and future requirements.

A CFO also helps in getting the most out of Government initiatives for the establishment. 

The advice imparted on tax deductions and subsidies provided is of high importance. Such advice to an establishment in its market infancy s game-changing.

Other functions performed by a CFO include deciding the financial model. It should be expressive of the risks and returns involved. 

Also, they create a business plan devoid of errors. Such errors might come from regulatory laws and compliances. 

Their inputs help in improving the working framework of the company. It improves the people-to-process connective and employer relations. Modelled after the financial gains an establishment receives, they prove crucial.

What does a CFO recognize?

As the chief of financial operations for a company, a CFO recognizes the volume of the company. 

They think that in terms of profits and cash flow are a mere outcome. The CFO improves operational metrics by performing risk-free assessments on an input-output system. 

The changes brought to the input system deliver a consistent output stream in return. 

 The CFO derives such assessments from customer retention and labour productivity. 

Also assessed are the outcomes on marketing expenditure and buy costs. Factors like the cost of acquiring new ventures help the owner make proper decisions. 

Linking performance outputs to financial gains narrows down the target to specific numbers. This derivation helps an owner make decisions easier.

A CFO will have a clear understanding of the risks involved. They will consider a low-risk initiative with considerable benefits in an instant. 

In another instance, a long-term beneficial initiative might get selected. Such is the responsibility of a CFO to make well-informed decisions for the owner to place bets on.

Talking about risks, a CFO recognizes that risks have moved far away from the definitions of the old way. 

Compliances, renewals, and tax laws are not the only risks anymore. A CFO has to assess the risks from performance and schedule. They should include disruptions and market preference in the batter too. 

Customer relations also matter when making a well-informed decision. This risk assessment harmonizes with the market capability of the establishment. It also probes for areas of improvement. The possibilities of alternate supplies getting established when the primary source is critical. Also important is the size of the customer base for the service or product the company delivers. A CFO also takes into account the technological impact from the far future. They then model a response to these risk statements.

The product or service should have a consistent appeal. They should still be relevant in the competition. In this case, a CFO recognizes the earnings and the means of earnings. Non-retainable customers deliver a blow to the future relevancy of the company. A CFO will recognize this and will plan responses to mitigate the risk.

Then there are MNCs with immense balance sheet results and their ability to raise funds. Pitting MSMEs against these MNCs will be the greatest financial risk ever for the former. 

A CFO, recognizing this, will tighten the cash flow with proper management. Such action will enable a company to perform better in the market and quickly make key acquisitions. 

They can also increase their profit-to-cost ratio and take fund-supported decisions. Such decisions made in critical times are a clear sign that the company is on the right path.

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A company should perform efficient fund management to increase its profits. This is also crucial for maintaining a market foothold and maintaining control over production. 

A CFO helps the owner mitigate their financial risks and helps them better use their capital. 

By ranging risks in company performance, the CFO includes every factor in consideration. These factors help in making key decisions for the company's present and future. 

A CFO plays several roles, from strategic decision-making to fund management. A CFO also will develop and execute financial strategies. 

These factors will cater to the enterprise's needs. They will be implementing robust financial systems that control cash flow. 

Along with these roles, a CFO also serves as the key advisor to the management team. They will provide recommendations derived from the company's financial impact.

A CFO delivers an incomparable contribution to the strategic direction and financial stability. Their priority to the company's growth ensures the company's long-term success.

Frequently Asked Questions (FAQs)

1. How is a CFO beneficial for an organization’s growth?

The key to a company staying afloat is a better financial strategy and fund management. A CFO will improve a company's market performance through informed strategic decisions. The CFO makes decisions about the company's financial position through a well-defined process.

The company can achieve sustainability, reliability, and scalability only by using a CFO. A quality CFO will serve as the protector of funds and the company's financial interests. They will always be ready to meet Government regulations and competitive strain.

2. CFO services are costly; what can be other workarounds?

Virtual CFOs can! Companies who find need professional help but lacking resources can use VCFOs.

The concept of a Virtual CFO is now helpful for such businesses that seek to grow and expand. One can avail of cost-efficient services with professional quality from VCFOs. Such services are always flexible, scalable, and accessible from the palm of your hand. This prospect is quite popular in India, and Especia is one of the best in the CFO services market.

Especia provides financial management services for MSMEs in India. Providing quality and focus across every work we do is our motto. Contact us to avail our wide range of services, serviceable by MSMEs of all volumes.

Contact Us for Outsource Accounting ServicesCFO ServicesESOP Services Bookkeeping Services in Delhi, Noida, Gurgaon, and all across India: write to us at accounts@especia.co.in. Or Call On :(+91)-9711021268 +91-9310165114

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