Virtual CFO in Healthcare: Why You Need One to Enhance Your ServicesSadaf Abbas
Virtual CFO in Healthcare: Why You Need One to Enhance Your Services
The Health Industry provides patients with medication, treatment, and consulting services worldwide. It has always been the fastest-growing industry in the world and makes up 14% of most countries’ GDP. The Healthcare industry recruits highly skilled medical professionals to cure individuals. It is one of the largest industries in the world, containing hundreds of sub-categories. With the changing global environment, healthcare virtual CFO is the latest advancement in the healthcare industry.
People involved in this industry are highly paid for their services. This category also involves financial managers responsible for managing the company’s assets, cash flows, costs, and profit. The pay for these professionals is tough for a small healthcare company. Due to this reason, small to mid-size healthcare companies are shifting towards a Virtual CFO, who would manage all the financial aspects, however, at a bargain. Before we begin, let’s see what a Virtual CFO is and what outsourced services they provide.
Virtual CFOs are part of a financial management firm offering services to companies that want to advance their businesses. These services can start from bookkeeping to virtual meetings with executives, forecasting economic patterns, creating accountancy plans, etc. Virtual CFO service is a non-traditional approach to healthcare business management. They oversee and manage financial decisions and operations for a company based on its economic structure and capital. VCFOs have the same role and responsibilities as in-house CFO, though they work remotely.
Financial Challenges in Healthcare
The financial system of a healthcare company is different from the rest of the industries. They have complex models, payments, and regulations systems. This industry is also the one most visited by government officials due to the service they provide. In addition, the employees in this industry have the highest average pay in any other sector. Some make three times what their peers make in a different industry. This policy, or more casually, custom, makes it difficult for a small healthcare company to manage its spending.
The Board of Directors of such a company pressures the C-suite (CEO, CFO, etc.) to cut costs as minimum as possible. The pressure develops chaos in the finance department, which then becomes the reason for mishaps. These mishaps include poor quality care and medications provided to the patient.
As a result, the patient turns to a more reputable and expensive healthcare company that provides better facilities and generates more profit. Eventually, this effect helps giant corporations grow, and small companies fail regularly. There is a big gap between large corporations and small healthcare companies, where 75 to 80 percent of the clients belong to large companies. The rest of the percentage gets divided into smaller corporations. However, most patients are not ready to pay large bills and would shift to a small company if they put in a little more effort towards improving the environment.
With proper cost analysis and financial solutions, a healthcare Virtual CFO can solve the patient switch problem and return to those small businesses. Therefore, a Virtual CFO’s core function is to provide solutions to issues that will help patients and improve small companies’ finances.
Is a Virtual CFO in the Healthcare Industry Worth it?
As we said, healthcare is one of the most lucrative industries in the world. In the healthcare industry, managing finances is a top priority. This industry has been very costly for the last two decades. And the cost of medical cures and treatments has been so high that it makes it nearly impossible for patients to meet the required fees. Pharmaceutical prices have recently hit a record high. As a result, people have shifted towards the government for medications and treatments worldwide.
One reason for this high cost is the mismanagement and overpaying for many employees. Moreover, company frauds are a prime factor in the consequences faced by a healthcare company in terms of capital. Healthcare frauds are known as white collar frauds with deception to care for the customer yet are intended to benefit the company.
Cash flow in a healthcare business flows in and out daily. A professional team of financial managers must appropriately manage these daily cash flows. Analysts, accountants, and bookkeepers must manage these daily cashflows appropriately. Great businesses hire full-time on-site CFOs and financial managers to look after the company’s financial system.
However, this is different with small companies. CFO is a highly experienced and skilled finance professional who is paid for every hour he stays with the company and, in addition, is paid commissions and bonuses. This scenario makes it impossible for small healthcare companies to hire an on-site CFO. Therefore, more significant margins make it easier for companies to hire full-time CFOs. As a result, small-scale healthcare businesses are shifting towards Virtual Chief Financial Officers (CFO) to achieve maximum productivity at a lower cost.
This article elaborates on how a VCFO can enhance your healthcare company’s ability to generate better profitability through its expert skills, knowledge, and network.
An in-house CFO is paid per hour for their services. According to Payscale, an average healthcare CFO gets paid $146,000 yearly, which can go up to $752,000 yearly. As for a VCFO who works remotely and with a flexible part-time schedule, you pay only for the relevant job ranging from bookkeeping to developing advanced strategies in utilizing the capital. A virtual CFO gets paid $97,000 to $235,000 on average. That is why the VCFO is more cost-efficient for the company. The virtual job also saves time for travel and extra free time involved in an on-site position. A virtual CFO usually has a team of remote financial professionals who work together in an organization. They all can be part of one umbrella company, and the client can benefit from this as they hire a team rather than one CFO at a discount.
The finance department of a company needs technologically advanced equipment to work. These include high-performing computers and a lot of telephones. Building an entire office is a fixed cost a company must pay before making any profit. To minimize this overhead cost of setting up a real office, a company can use a virtual team working on their equipment.
These cost-cutting techniques are essential for a startup company because they are initially very low on budget. A startup CFO’s target is to bring more potential investors to the company. They must build track reports, create investor relationships, and supervise loans.
The Financial Team
VCFOs do not work independently. Instead, they are members of a large organization consisting of financial professionals working together remotely. These organizations find clients in different industries and offer a financial plan. After the approval of a financial plan, the organization assigns one or more finance professionals to their client, depending on the client’s requirements. There is a profit-sharing agreement between the professional and the organization.
These payment structures may vary according to a person’s experience or the type of organization they have worked for. Generally, professionals with experience in startup companies have lower pay than professionals with expertise in renowned or multinational corporations.
In the current economic situation, medical businesses have been the most constant client to seek help from these organizations. As a result, they are switching to work with a remote financial team for their stability. This digital economic working gives the medical business an edge over its competitors that rely on their personal finance team’s limited knowledge and skillset. In addition, they also save a lot of their budget and time working with a Virtual CFO team.
This practice has paced in this decade by generating better results. Understanding financial technology is crucial for today’s CFO, and a Virtual CFO is usually capable of this change.
Experience Across Industries
A traditional CFOs’ experience is limited to the industry to which they belong. VCFO, on the other hand, provides a complete range of financial analyses and reports to different sectors. They have connections with experts and investors from various industries that help them in their decision-making process.
For example, if a healthcare industry Virtual CFO wants to import ventilators from a supplier in China but the cost presented by the supplier is not justifiable, he will use his connections within China to find better suppliers with better deals. This diversified portfolio can help a healthcare business in generating links and collaborations. Networking can assist in cost reduction, buying high-quality equipment, and developing long-term relationships. VCFOs also come equipped with industry experience working with many small to medium enterprises (SMEs). They only have to network a little when working on goals requiring help from multiple industries, making it easy for them to know the entire case.
Experience across industries also helps a healthcare Virtual CFO when he develops strategies and plans for the company. For example, in the healthcare industry, these goals could be maximizing profitability, controlling overhead expenses, and cutting down any extra costs. With these experiences, Virtual CFOs can take any challenge that comes their way.
Training & Productivity
On-site CFOs are given training for 4 to 6 months before becoming a company’s CFO. This new employee training takes up hours of face-to-face training. VCFOs does not require exercise as an in-house CFO. A VCFO has different industry experiences and understands the importance of on-time response. One significant difference between an on-site CFO and a Virtual CFO is that VCFO focuses more on core goals that would help the company’s growth rather than managing day-to-day small business operations. As a result, they are more productive towards your company goals.
Most of the time, A VCFO is part of a vast team comprising many VCFOs working in different industries. This team is a limited liability company of its own. By hiring a VCFO, you employ many highly-skilled financial professionals’ expertise.
Taxation Framework in Healthcare
Taxation is the supreme responsibility of a company’s CFO. Governments use taxation to improve the economy through planning funds allocation for the betterment of their people. In addition, the government uses the tax to fund projects in different sectors, such as infrastructure and healthcare, that would eventually improve the standard of living for the people. Besides that, taxation fraud or delay can move a company towards regulations. An experienced VCFO has a good grip on developing taxation reports; it helps them present information in the best way possible to the auditors and government authorities.
Every healthcare company serves different types of products and services. These include healthcare consulting firms, clinics, medicare, pharmaceuticals, and operations. As a consequence, they need different types of accounting services from their financial officer. For an on-site CFO, it is often difficult to switch from one healthcare company to another due to their dissimilarity.
Nevertheless, this is not a problem for a Virtual CFO. They work with various organizations, which gives them a grip on unrelated organizations.
Another fascinating thing about Virtual CFO services is that you only pay for what you need. Every package is customizable according to your company’s requirements. You can choose from the umbrella company’s portfolio of services and decide on your plan.
In most companies, the CFO oversees the entire regulatory framework. However, their position in the company delays these regulations and does not measure mandatory compliance. This delay then becomes the reason for a company to default and become riskier in the eyes of government regulatory agencies.
Regulation is a more challenging aspect for a healthcare company as they have a complex regulatory system due to the nature of their product. An irresponsible CFO can create problems for a company if he does not care for the regulatory agencies.
Virtual CFOs are part of another company that connects them with the organization they will be working for. To fulfill the requirements of both companies, VCFO is more precise regarding regulations, and they look for any financial principles, addressing them with proper care.
Their advanced plan forecasting is also made according to the rules so that the company should avoid any problems from the government even when the virtual CFO leaves the company.
Ability to Digitalize
Digitalization changes a CFO’s job into a virtual one. Everything is a part of digitalization in the financial world, from stocks to crypto and foreign exchange. This development helps connect financial information from different parts of the world and makes it easy and efficient for the reader.
In the current economic scenario, companies that cannot digitize their finance department are losing a lot of money in business. However, those who tried too hard to operate with technology had to face issues in the past. For example, when Ford Motor Company designed a new segmentation called Ford Smart Mobility that was trying to enhance the electric car business, it failed due to segregation from the rest of the departments within the company.
Virtual CFO is the newest addition to digital finance. This new job is more capable of studying cost analysis and financial trends to develop capital patterns. Furthermore, it is the most advanced financial position, which makes it a crucial part of the future of global business.
Earlier, low-level professionals such as bookkeepers, accountants, or entry-level financial analysts were working remotely. Now, CFOs have also got their part and are working full-time remotely, providing impressive results and saving many running expenses.
This digitalization among different sectors supports the overall business market as companies use it to make connections more smooth.
VCFO is a technologically enhanced job. It does not work with traditional methods but uses Artificial Intelligence to produce patterns and structures for financial stability and scalability. These strategies help the company look into the future and stay prepared. On-site CFO tend to work with designs and web programs from the company. However, Virtual CFOs work with various digital programs to collect data for future insight. In the post-pandemic situation, this digitalization of financial data is more critical. Traditional CFOs have to learn these patterns from scratch.
On the other hand, VCFOs come prepared with the knowledge and skillset required to operate these digital financial systems.
Future insights assist a company in looking into the future. How the company and industry belong to is going to change. In the healthcare industry, these changes can be how patients to book appointments, i.e., online mediums or behaviorist shifts affect the patient. Therefore, we deliberately need digitally skilled virtual CFOs.
Summing it Up!
In today’s world, health has become a priority for every individual, regardless of income or nationality. The key for an organization to keep growing in the current era is to change with the rapidly evolving technologies. Virtual CFO is a digital job that improves financial structures and helps the company grow as a highly-productive organization. The strategies this digital job brings to the healthcare company will help it in its complex economic system. That said, these technologically advanced jobs are the future of the job market, and the sooner companies understand their worth, the more productive they will find themselves in the future.