Do you think that because your business is small and growing, you can neither afford nor benefit from CFO services for startups?
Think again!
Many founders have yet to realize the role a CFO can play in taking their company to the next level. A competent CFO provides much more than number crunching and watching the bank account. They help with budgeting, planning, and analysis; cash flow and profitability management; fundraising, reporting, and compliance.
This article aims to educate you and other founders about the role and benefits CFO services can provide your company.
A chief financial officer provides analysis and advice to management on financial matters. But unlike a controller or treasurer, who may focus solely on accounting activities, a CFO is involved in all aspects of corporate finance, including:
A common misconception about the role of the CFO is that they just crunch numbers and provide financial statements to investors. In reality, CFOs are crucial in helping CEOs chart their companies’ growth strategies from an internal and external perspective.
The primary responsibilities of a CFO include:
While engaging CFO services differs slightly from hiring someone in-house, they can add tremendous value through strategic decision-making and planning.
Knowing when you need higher caliber financial services can be tricky for startups because the Chief Financial Officer (CFO) is not an operative function like a marketer or developer. The role is often considered one of the last pieces of the puzzle. Still, even early-stage startups could benefit by engaging a CFO.
For instance, hiring a full-time CFO may not be suitable for your business if you’re an early-stage startup still building your product or developing your business plan. Hiring bookkeeping services and financial reporting may be sufficient. However, you need to know when you’ll need the CFO services.
Here are some of the signs to look for:
Additionally, before engaging an outsourced CFO for your startup, it’s essential to weigh the costs against the benefits. A bootstrapped startup with little capital may struggle to afford a strategic external consultant like a CFO.
Someone with expertise in accounting and finance can be invaluable to your progress when taking your business from its early stages into something more substantial.
CFO services can come in many sizes and arrangements. Here are the most essential ones.
Financial planning and analysis are an integral part of any business. The CFO will prepare budgets, forecast revenue and expenses, and analyze financial performance over time.
Budgets help companies determine how much to spend on various items, such as salaries, rent, marketing, or supplies. Forecasting helps businesses anticipate future costs and revenues to plan for them accordingly.
In addition to preparing budgets and forecasts, the CFO may also analyze historical data to develop predictive models to map the business’s trajectory. These models inform executives about potential financial outcomes based on their recent decisions.
Startups face many challenges, and one of the biggest is cash flow management. Cash flow forecasting and working capital optimization are critical to financial success.
Below are the essentials:
A central advantage to engaging CFO services is the knowledge they provide when dealing with investors and fundraising. They speak ‘finance’ and can lend gravity to your financial projections when seeking to raise funds from investors through public offerings or private equity deals.
The CFO can also aid investor relations through quarterly earnings updates and annual shareholder meetings.
An experienced CFO can also assist a startup with preparing statements that involve collecting and analyzing data to provide the necessary information for management to make strategic decisions. Of course, this can be time-consuming if done manually. Excellent CFO services will help you use and implement automated solutions such as cloud accounting software or ERP packages.
Finally, one thing non-experts often need help with is ensuring regulatory compliance. CFOs have an important role here. They are responsible for filing all forms on time, correctly filled out, and accompanied by supporting documents such as invoices or contracts.
When you’re looking for the right CFO for your startup, there are some important considerations to remember. Here are a few tips to help you make the best choice:
Ultimately, the right CFO for your startup will depend on your unique needs and priorities. These tips will equip you to find the right person or firm to help guide your financial strategy and drive growth.
Regardless of your situation, CFO services can help. The strategic insight they provide and financial planning, cash management, and investor relations can help your business progress faster.
The startup experts at Founder’s can help you balance the costs and benefits of engaging a CFO for your business while ensuring your company is on the right track. Contact us today to get started.