The Virtual CFO: Using payments/banking technology to increase value

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By Deborah Matz

Business owners need more help than ever to manage cash flow and budget expenses – and 68 percent say they are looking to their accounting and financial partners to provide this help, according to an informal SunTrust survey of business owners.

So, how does becoming a Virtual CFO help CPAs play an even more vital role to clients? A Virtual CFO uses technology to extend value to clients through knowledge, helping expand the CPA’s role as trusted advisor.

The broad adoption of online banking and electronic payments brings an increased flow of electronic payment information. CPAs can leverage this data to help clients map a cash-flow strategy, assemble detailed budgets and financial statements, and monitor progress on-site or remotely.

Additionally, through deep knowledge of a client’s business and careful research into his or her payments-related practices, a Virtual CFO can provide recommendations to help address priority business issues such as improved cash flow and reduced expenses.

Forward-looking CPAs can help their business clients use technologies to improve processes and reduce resource commitments. By educating clients about the benefits of implementing paperless financial systems and electronic payment systems, CPAs can empower business managers with better control over cash flow, budgets, and profitability.

With many small businesses looking for more help, CPAs have ample opportunity to help boost clients’ profitability and business efficiencies. The following strategies provide a basic foundation for CPAs to begin or continue their transformation into Virtual CFOs.

Communicate the importance of a payment strategy

A solid payment strategy addresses the methods and costs involved in accepting and disbursing payments while also protecting sensitive company and customer information. CPAs should address the importance of this critical plan and explain how it takes into account customer and vendor preferences, as well as practical business needs such as timely funds access and more efficient business processes.

With payment options comes increased customer convenience, which is why more and more business owners have adapted their systems to accept more payment types. Twenty-six percent of business owners added the customer choice of electronic or card payments in the last 12 months, according to an informal SunTrust survey of business owners.

However, while convenience in payment acceptance is important, not all businesses should offer all payment types. CPAs should help clients track customer purchasing behavior to evaluate the best customized payments strategy and ultimately decide which payment forms to accept.

CPAs need to review evolving payment technologies with clients and develop a strategy that helps improve collections, streamlines disbursements, and meets changing customer and vendor preferences.

Many small businesses still run a cash-only operation, but consumers and businesses alike continue to move toward electronic payments. Debit and credit card acceptance is becoming a consumer expectation, but card acceptance also is becoming increasingly important in business-to-business commerce. Many companies and government institutions rely on purchasing or corporate cards to reduce the costs of working with vendors. In order to accept their payments, businesses need to be able to accept the cards.

According to First Data’s “January 2010 SpendTrend” report, overall same-store electronic transaction growth increased 7.9 percent compared to January 2009. CPAs need to advise small business clients about the importance of accepting multiple forms of payments, from debit cards to paper checks in order to offer customers the full range of preferred payment choices.

In addition to offering customers convenience, electronic payment capabilities can have an impact on collections by allowing a business to accept a check or card payment over the phone from late-paying customers rather than waiting for a customer to drop a check in the mail.

Finally, by helping clients create a solid payment strategy, CPAs can increase the amount of detailed information available to support financial analysis and process improvement. This helps Virtual CFOs work with clients to streamline business operations and improve cash flow.

Maximize cash flow

Similar to staying physically fit, staying financially fit requires constant attention and upkeep. CPAs can look for new ways to keep clients’ cash flow in shape by utilizing simple strategies and technologies that provide clients and CPAs with a streamlined system that delivers better results.

CPAs should start by getting the appropriate level of access to clients’ accounts, and then advise them about online banking features that can support the financial reporting system and business decisions. Most small business owners use some online banking tools, but they might not access all of the appropriate features. With a few clicks of a mouse, CPAs and their clients can have access to features that allow them to send Automated Clearing House (ACH) payments, detect potentially fraudulent transactions, and download information into common business software programs.

Active client use of online banking and access to financial information by the CPA is an important step in a Virtual CFO strategy. This tiered access allows a CPA to serve clients more efficiently, more often, and from almost anywhere in the world. It also provides the appropriate level of control and security by allowing CPAs to help automate, manage, and track cash flow, budgets, and profitability while clients maintain control of spending approval or check-writing.

Another important cash flow tactic is helping clients set up procedures to analyze and control expenditures. For example, providing designated employees with access to a company credit card can improve expense tracking and limit or restrict spending, in turn giving the business more control over expenditures and cash forecasting.

As a Virtual CFO with strong information access, CPAs can help business owners reinforce financial discipline. While most business owners create budgets, they don’t always refer back to them each month and take note of variances. A Virtual CFO should encourage clients to use electronic reporting options to set monthly limits and goals to help improve cash flow versus relying solely on a yearly or quarterly budget exercise.

On the reporting front, a Virtual CFO can use electronic information to create systems that automatically compile a monthly flash financial report from electronic financial data to help evaluate clients’ business performance. This data can be used as part of regular meetings or teleconferences to review performance against targets for budgeting expenses, generating sales, or maximizing cash flow.

Introduce payment technology tools

In the current business environment, cash flow is top of mind for small businesses, so having the right tools in place is essential. CPAs should have a checklist to ensure clients have access to the right payment equipment and resources. They should also develop relationships with banks and merchant services providers that can help CPAs advise clients. For a small merchant, a template checklist could consist of the following items:

  • Point-of-sale terminal(s) appropriate for the merchant’s business needs
  • Corporate cards to help better manage expenses and streamline vendor payments
  • Check scanners to submit check images electronically from home or office for deposit
  • Procedures and systems that maximize data security/encryption at the point of sale or as part of electronic and paper filing systems

Take, for example, a home-based delivery business that needs to accept payments on the go as well as at home. A CPA could connect the business with a banker or merchant services professional who can recommend a wireless terminal, as it can accept all forms of payment and can be used anywhere the business owner needs to be. This increases convenience and security for the business and its customers, in part by reducing the paper trail of sensitive information.

Additionally, businesses can use credit cards within their own organizations to help streamline vendor payments while capturing the information needed to keep tabs on a company’s finances.

CPAs also can help their clients move away from paper and still accept checks by utilizing affordable payment technology. Having the correct technologies in place allows small businesses to continue to accept checks while improving cash flow and reducing the risk of accepting a fraudulent check.

Virtual CFOs should work with clients that accept a high volume of checks to investigate the following technologies:

  • The ACH network allows a business to make authorized funds transfers to and from its bank account – in many cases skipping the paper check process.
  • Electronic check acceptance (ECA) converts a paper check to an electronic transaction, useful for merchants accepting checks in person or over the Internet. The transaction is cleared through the ACH system, and funds are generally deposited in two business days. ECA transactions may expedite access to funds and reduce processing fees at a company’s financial institution.
  • Remote deposit allows business owners to scan checks and submit them electronically for deposit from their home or office. Service companies, home-based businesses, and others who receive check payments can gain access to funds without the time and travel required for daily bank runs or delays when business demands supersede in-person deposits. Remote deposit may also offer a business owner a later deposit cut-off time.


Encourage data and fraud protection

Organizations experiencing a data breach in 2009 paid an average of $6.75 million per incident to address the breach, rebuild their brand image, and retain customers, according to Ponemon Institute’s “2009 U.S. Cost of a Data Breach Study.” While this may scale differently for small to mid-sized businesses, the bottom line is that data breaches are costly in terms of dollars, time, and reputation.

Virtual CFOs can help educate their small business clients about the importance of data security by discussing the potential reputation damage and financial costs of a data breach and other fraud. Advisors also can connect businesses with the right resources to help protect against fraudulent activity and remind clients to keep current with software and resources to help protect the business’ and customers’ data.

For example, a CPA should encourage clients who accept card payments to understand their obligations to comply with Payment Card Industry Data Security Standards (PCI DSS), a set of comprehensive requirements for enhancing payment account data security.

Many small businesses believe they are exempt from compliance. However, every merchant that accepts payment cards has a cardholder data environment (known as CDE, or the computer systems and applications that use or store sensitive card data) that comes under the purview of the PCI DSS. It’s possible to limit – and even shrink – the scope of the CDE in order to reduce or minimize the merchant’s PCI burden.

Virtual CFOs should encourage clients to work with their merchant services provider to identify new technologies that ease the burden of PCI DSS compliance. As important financial advisors, CPAs are in a position to guide clients toward resources and solutions that meet individual business needs. Examples of ways to help reduce or eliminate the risk of fraud include:

  • Reducing or eliminating paper checks, cash, and expense reports by automating systems using corporate cards, payroll cards, and ACH, as well as online financial tools
  • Establishing fraud alerts using online tools and automated controls that alert the accountant and small business as soon as suspicious activity happens
  • Advising clients about new technologies that help protect financial data and also minimize the burden and cost of PCI compliance

As Virtual CFOs, CPAs will have the resources to help set up the alerts and build the procedures to analyze suspicious activity and take action when it happens. CPAs who follow these strategies might not only broaden their clients’ success, but also reap the rewards of expanding their service offerings. While technology plays a vital role in the Virtual CFO approach, it isn’t just about the technology. It’s about using the technology to help businesses run more efficiently and protect sensitive financial information.

As technology advances, better access to better information can help a CPA increase his or her value to clients. Using electronic financial and payments data can help CPAs automate key reporting functions and spend less time compiling reports and more time working with clients to drive business success, helping elevate the CPA’s role from bookkeeper or advisor to Virtual CFO.

About the author:

Deborah L. Matz, group vice president at SunTrust Bank, and her team of treasury management sales professionals provide payment system advice and solutions to companies of all revenue size and in various industry segments. She can be reached at (410) 986-1694 or [email protected]. SunTrust Bank, Member FDIC.

Reprinted with permission from the Virginia Society of CPAs.

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