How Can Virtual CFO Services Enhance Strategic Financial Planning in Manufacturing?

Posted On 2024-04-15

Author Sanjeevani Sathe

India set to increase focus on the manufacturing industry

Prime Minister Narendra Modi's clarion call for 'Make in India, Make for the World' at the World Economic Forum was a signal that India is ready and keen to increase its share of manufacturing from 17% in 2023 to 25% by 2025.

While addressing the 118th Annual Convention of PHD Chamber of Commerce and Industry (PHDCCI) on "Future-Proofing India as the World's Sustainable Manufacturing Hub," Union Minister Shri Hardeep Singh Puri said that the Performance-linked Incentives (PLI) scheme has revolutionized manufacturing in 14 strategic sectors. He said, "Due to PLI schemes, manufacturing sector FDI has increased by 76%."

These initiatives highlight the need for strategic financial planning to support the growth aspirations of the manufacturing sector companies. Virtual cfo services in India are ready to guide manufacturing companies with strategic financial planning and analysis (FP&A) consulting solutions in their growth journey.

Chennai, Tamil Nadu, has emerged as one of the Global manufacturing and sourcing hubs, and virtual CFO services in Chennai, such as CFO Bridge, are playing a prominent role in its growth phase.

The Role of Virtual CFO Services in Strategic Financial Planning in Manufacturing

SME businesses engaged in manufacturing face multiple challenges due to changing demand for their products, the emergence of new competitors, or newer technologies. They have to manage their resource costs, among others, to remain competitive. Mid-sized manufacturing companies interested in growth must also attract capital investments to take advantage of the FDI coming into India due to various Government schemes.

SME manufacturing companies in Chennai and other Indian cities favor Virtual CFO services to help them navigate the challenges of connecting business strategy with the financial planning aspect of their business. Virtual CFO consultants offer expert strategic FP&A services at an affordable cost and on-demand to Indian manufacturing SMEs.

The Virtual CFO services help to marry business planning with business strategy and thus prove to be a critical success factor for manufacturing companies in India. Understanding the ever-changing market dynamics and the strategic role that any manufacturing company has in the local, regional, or global market needs a strategic mindset and experience. CFOs have these skills and the required finance skills to formulate a strategically sound financial plan for their clients.

Enhancing Budgeting and Forecasting

The capital investment required for manufacturing businesses is heavy, and budgeting and demand forecasting are essential to improving the ROI of capital investment. The CFOs providing Virtual CFO solutions for the manufacturing industry are experts with deep knowledge of the financial budgeting and revenue forecasting processes.

Budgeting for a manufacturing company includes estimating demand or revenues, production costs, working capital and cash flow, and capital expenditures.

A forecasting exercise helps business leaders gain guidance from historical data, current trends, product innovations, and competitor strategies. Virtual CFO services in Chennai can help manufacturing companies improve their budgeting and forecasting techniques.

Cash Flow Forecasting: A Key Tool For Financial Health

Streamlining Cash Flow Management

Cash flows involve managing both inflows and outflows. For a manufacturing company, cash inflows are mainly from the sale of goods. A virtual CFO can provide valuable advice to the internal finance team on strategically evaluating cash flows.

Part-time CFO outsourcing services can work with the production department to identify strategies to reduce production costs, such as finding an alternative supplier or renegotiating the terms with the existing raw material suppliers. Virtual CFOs can analyze inventories using ratios and pinpoint the root cause of the problematic situation. These CFO services also help suggest ways to optimize the inventory of raw materials, WIP, and finished goods using forecasting models.

The virtual CFO evaluates customer profiles and can provide solutions to improve payments by designing discount schemes and adjusting pricing strategies.

Risk Management and Compliance

If you are setting up a new manufacturing unit in India, you will need to comply with various rules and regulations for setting up factories. There are seventeen-plus regulations around setting up permissions and fair labour policies.

The government of India has also launched some fast-track schemes to support manufacturing units, such as the production-linked incentive (PLI) scheme to develop 13 sectors that are on par with global manufacturing standards.

India also has industrial clusters that help the manufacturing industry. Some of these clusters are located in Mumbai-Aurangabad, Pune, Gurugram-Bhiwadi-Neemrana Corridor, Noida—Greater Noida—Yamuna Expressway, Bengaluru, Chennai, Hyderabad, Ahmedabad, Vadodara, Bharuch-Ankleshwar Cluster.

Manufacturing companies need CFOs and lawyers to ensure that they understand all the rules and regulations and mitigate the risks of doing business. Virtual CFOs in India help manage risks and ensure compliance, both. Recent years saw many Regulatory Changes In Financial Reporting.

If you are not ready to appoint a full-time CFO, an interim CFO can help you with risk management and compliance.

Implementing Cost-Saving Initiatives

Outsourced CFO services, such as CFO Bridge Services, have a network of CFOs with experience across many industries and functions. Suppose you hire their virtual CFO services with a specific mandate to implement cost-saving initiatives. In that case, they will study your current business practices, benchmark with industry leaders, and suggest a plan for improving ROI by saving costs.

These costs can be across the supply chain. Here is a case study - How CFO Bridge Team brought Improvement In Gross Margins By Transforming Purchase Processes

Leveraging Technology for Financial Efficiency

CFO consulting services or virtual CFO services in India are experts in using new-age technologies, such as Power BI or other Dashboards, instead of mere Excel-based MIS spreadsheets. CFOs use technology tools for most finance functions, such as forecasting, MIS, payroll, and even transaction reconciliation (Reconcify).

Even if they are not full-time with a particular manufacturing company, these CFOs' ultimate goal is to increase the business's equity returns and ROI, and they leverage technology software tools wherever possible.

Benefits provided by a Virtual CFO Services Team

Using the services provided by VCFOs or virtual CFOs to complement your in-house finance and accounts team can improve your business's ROI.

Access to expert advice at a fractional cost

Fractional CFOs or virtual CFOs provide expert advice and assistance in implementing it for your business and your accounts team at a reasonable cost compared to hiring a full-time CFO in-house.

Plug-and-play model

Virtual CFOs in Chennai are available on demand or a retainer basis. Companies need a CFO to navigate major changes in their business, and hence, fractional CFOs can fill this gap when needed.

Improve the valuation of the business

Virtual CFOs can help manufacturing startup companies increase their valuations to attract venture funding. They also help prepare business plans, conduct due diligence, and provide other services required for a company in its growth phase.

CFO Bridge is a leading virtual CFO services provider with a successful presence in Mumbai, Chennai, Bengaluru, Hyderabad, Pune, and NCR markets.

Please fill out this contact form and set up a free consultation to discuss your business needs.

Image by nuraghies on Freepik" target="_blank">Image by Freepik

Ready to take your
finances to the next orbit?

Let's talk! Book your free consultation today

Get In Touch
Download The Brochure