Startup CFO services are growing in popularity, as founders lean on financial experts to provide a data-driven path to success.
When you started your business you found all of the right tools you needed to help you achieve your goals. You likely found ways to easily and efficiently complete your basic accounting and bookkeeping needs. It’s been working so far, but with growth, you are likely looking for additional financial expertise to continue propelling you forward.
Sound like you? It may be time you turn to a CFO service. Not only do CFO services provide basic accounting and bookkeeping services, but they also provide an extensive analysis of your current financials, help you make critical decisions for your business development, and allow you to spend more time growing your startup than worrying about your finances.
To help you decide if it is time for your startup to move towards a CFO Service, we have put together a guide explaining the primary services you should look for when searching for the right CFO service for you.
Budgeting and forecasting are incredibly important in driving your startup’s growth. By working with a CFO service that provides financial modeling, budgeting forecasting you will be able to gain deeper insight into what drives business performance (or underperformance).
Because growth is on the minds of nearly every startup owner, a financial model should be a top priority. Financial models go hand in hand with budgeting and forecasting in that they are used to predict your business’s future financial performance. Additionally, you should look for a CFO service that provides a scenario analysis as well. A scenario analysis takes into account the best and worst-case scenarios relating to your investment portfolios and predicts potential outcomes using your financial model. Once you’ve refined your financial model, you’ll use it to set a budget for a particular period of time. That budget becomes your operating framework for your business and you use variance analysis to measure your performance against that budget. Variance analysis provides feedback that helps you forecast into the future to understand, based on new information, where your numbers will actually be at a future point in time. This will often be quite different from your original budget.
With the help of financial models and scenario analysis, your budget and forecasts will become essential tools for growth. Relying on your budget will help your startup plan its expenditures and create a path towards certain goals. Inevitably, you will deviate from your budget and you’ll need create a forecast to give a more accurate depiction of your financial future.
While the primary function of pricing analysis is to ensure you are charging the right amount for your services, it also provides insight into market responsiveness to your prices, the demand for your products, and provides information you can use to compare yourself to your competition. With all of this information coming from your pricing analytics, you will be able to create a pricing strategy to help drive your startup.
Pricing analysis helps your startup by providing immense details into the numbers behind your pricing. As mentioned previously, you will be able to use these analytics to create a pricing strategy that drives everything from setting the proper prices based on customer interaction, reaching maximum profit through review of price elasticity, competing with other startups offering similar services, and revising all of these areas to push your startup towards growth.
As a growing startup, you likely have many people with various amounts of ownership in your business. This can get complicated, and as you grow, it is ever-changing. Because of this, you should be sure your CFO service offers some sort of cap table management. This will eliminate the work you have to do to keep up with changes in ownership, who has what, and what it all means for your startup. Accuracy is essential when it comes to cap tables because nearly every large decision made about or for the company will in some way affect ownership.
Capitalization tables clearly show your company’s structure. The importance of an updated cap table is invaluable during a period of growth and therefore, it must remain up-to-date and easily accessible. Having a CFO service that manages your cap tables will help you (or someone else on your team) avoid spending the time to continuously update the ever-changing information and ensures the information you have is accurate.
As a startup, one of the things you probably quickly caught onto was the importance of properly and accurately closing your books. An error in this process often leads to inaccurate financial reports and a frustrating amount of time spent fixing the mistakes. While month-end closing isn’t always difficult, it can be tedious.
To avoid spending time fixing mistakes and to ensure you are completing everything required, look for a CFO service that will take you step-by-step through the development of a month-end closing process.
Having a detailed and well-developed month-end closing process will help your startup complete its monthly financial statements in a timely and accurate manner. Using a CFO service that offers process development, like Founder’s CPA, will take away the stress of creating and implementing a month-end close process on your own, and provides the reassurance that your work is being done efficiently.
With so many moving pieces in your accounting system, it is important to have policies and procedures in place that ensure accurate, complete, and timely reporting. You should have a standard for completing each and every report within your accounting system for maximum results.
Once these policies and procedures are in place, it will be smooth sailing. However, the road to getting to that point is not always easy and requires a lot of time spent developing and implementing your efforts.
Setting policies and procedures is the first step in creating a successful accounting system. However, the development and implementation are time-consuming and very tedious. Working with a CFO service that offers policies and procedures development and implementation will help you avoid potential errors and increase the efficiency of your reporting.
The work of a CFO is difficult, time-consuming, and oftentimes tedious. It is a full-time job requiring plenty of attention. You will likely need to hire an in-house CFO, which can be incredibly costly or you can take the more efficient route of hiring an outsourced CFO service. This less pricey option provides all of the benefits of an in-house CFO service, however, you won’t have to go through the hiring process, provide job perks, or provide the tools needed for them to complete their tasks.
Outsourced/Interim CFOs are well-versed in their trade, meaning they provide all of the major CFO services while also focusing on small but necessary components like 409a valuations and strategy consulting.
Often overlooked, 409a valuations are essential for private companies looking to provide shares to their employees, which is a growing trend for many startups. The valuation process determines a minimum allowable strike price for employee stock options without creating nasty tax consequences for your employees.
Strategy consulting is another added bonus to hiring an outsourced CFO service. Because they have a strong understanding of your financials, but do not have any personal ties to your business, your service should offer substantial advice for strengthening your business based on their reports and expertise.
Not only will hiring an outsourced/interim CFO save you time and money, but they will also provide next-level expertise and attention to detail that you may miss out on with an in-house CFO.
Firms, like Founders CPA, that provide CFO services should also provide 409a valuations to help you with placing a value on your private shares and should provide strategy consulting to explain reports in detail, go over projections (including your budget and forecast), and help the rest of the executive team make informed decisions based on your financial data.
As a rapidly growing startup, there are plenty of areas for you to be placing your attention. Financials are arguably the most important, however, they are time-consuming and require an immense amount of attention to detail.
To set yourself up for success, consider preparing a useful financial model for use during the fundraising, budgeting, and forecasting processes. Further, additional services like pricing analysis that sets you up for a strong cash flow, cap table management that ensures equity compensation compliance and development of consistent and trustworthy month-end closing processes are all essential parts of a fast growing accounting department..
Though it may seem overwhelming to efficiently manage all of these tasks, you can turn to a CFO service, like Founders CPA who are experts in all of these areas and can provide the sound financial advice your startup needs to succeed.
If you are a startup in search of a CFO service that provides all of this and more, consider reaching out to Founders CPA. Here you can set up a free consultation to discuss the many ways Founders CPA can help your startup grow.