“Does my startup need CFO services?”
Many would argue that although a CFO can bring in a high-level financial perspective, a senior executive is an unnecessary and expensive add-on.
A well-trained accounting staff or a finance-savvy CEO can manage the company’s finances, right? Our answer there is yes and no.
Yes, a small team or a CEO with a background in financial management can satisfy the demands of a business — especially if you’re still yet to turn a profit.
However, a CFO guiding the team from its very early stages can put the startup in a position for growth.
To help you decide on whether or not engaging in CFO services is right for your startup, let’s begin by defining the role of a CFO.
What is the role of a CFO in startups?
In a corporate business, a CFO typically has multiple responsibilities within the finance function, such as controlling, financial planning, treasury, and auditing.
CFOs are also experts in finance and accounting issues and are there to make sure that financial strategies for the company are in place.
They, however, play a minor role in making strategic decisions and in business transformation.
For a CFO in a startup, the responsibility goes beyond managing finances. CFO services for startups go from setting a path for growth, establishing new relationships, to creating core financial processes and reporting requirements.
To give you an idea, here are the responsibilities of CFOs in a startup:
- Accounting and controlling
- Cashflow management
- Forecasting and financial planning
- Budget preparation
- Business reviews
- Guidance and review of process and policies
- Capital acquisition
- Design and implement reporting systems
To put it simply, a startup CFO is not just a numbers cruncher, but more of a hands-on trusted advisor for the rest of the startup’s leadership team.
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What value can CFO services add to startups?
Proper Cash Flow Management
According to a CB Insights survey, the top reason why startups fail is that they ran out of cash or they failed to raise new capital.
Without someone keeping a close eye on the business’ expenses, a startup can easily drain their capital even before they establish a market presence.
A venture that is yet to create revenue and is currently building a “runway” for the startup to take off, proper cash flow management is the key to keep it afloat.
A CFO can expertly manage your startup’s expenses, prevent unnecessary costs and help ensure that you have a steady stream of cash.
Create Scalable Infrastructure
A strong financial foundation is what any business needs to continue thriving. One huge aspect of that foundation is financial processes and systems.
A CFO can help your startup company create a scalable financial system, from payroll, payment processing, and accounting systems that adjusts as your business grows.
Analyze Financial Reports
Do you understand what your reports are telling you? If you don’t have any financial background, you might struggle to understand what your data is telling you.
One of the benefits of CFO services is that you have an expert on your team helping you prepare and also analyze your business reports.
When your startup is data-driven, there’s a higher chance for you to identify opportunities and anticipate any challenges before they happen.
You can also use these financial reports as a basis in making vital decisions, as well as improving the overall operations of the business.
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Being a well-experienced executive, a CFO can direct you to the right connections and help you build them
This is especially an advantage to new ventures that have yet to create investor, vendor, and customer relationships.
Guidance in Funding
When the time comes where your startup needs funds for expansion, a CFO who has an established relationship with investors can play an important role in raising money for your company.
They will assist you in analyzing your current financial status, put strategies in place, assist in negotiations and ultimately help you get prepared to raise funds.
Support Through Ups and Downs
Especially during these unpredictable times, reliable CFO services can help startups get through rough periods as well as rapid growth.
CFOs are forward-thinking and can provide you with strategies to navigate through your business journey.
Outsourced CFO services
With so much value that a CFO can add to startups, it’s also evident that having a C-suite employee in your team is a huge investment.
As a pre-revenue startup, you probably might yet not afford a full-time CFO, which is why outsourced CFO services make total sense.
On-demand CFO services mean you are not required to pay salary, benefits, provide leave credits, etc., you only need to pay for the services that you use.
A virtual CFO can provide the same high-quality services as a full-time financial officer, but at the fraction of the cost.
They can help you manage your startup’s finances, put systems and processes in place, and provide you with insights and guidance as your venture expands.
(Read our article on 7 Reasons to Use an Outsourced CFO)
How can you tell if your startup really needs CFO services?
In the past, startups put off hiring CFO services until they are more established or they stick to the “old rule” of waiting until the company reaches a $100 million revenue.
However, as the role of CFOs evolved, particularly during the pandemic, even pre-revenue startups can benefit from CFO services.
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Such advantages include streamlining business and financial processes, as well as getting real-time strategic insights and forecasts, to name a few.
One clear indication to determine if it’s the ideal time to hire CFO services is when the expertise and time of the CEO or other members of the team are better used elsewhere– such as getting the business off the ground.
CFO services free the time of startup founders from managing finances so they can focus on other core business activities.
Engaging with CFO services early allows new ventures to put processes in place, which they will find essential as they continue to move on to the next stage of the startup journey.
Are you considering CFO services for your startup? We can help.
At miplly, we offer more than top-notch bookkeeping.
Whether you are an early-stage startup or preparing for an IPO, our senior-level experts are available to provide CFO services that you can rely on at every step of your journey. Get in touch with us today!