When it comes to start-ups, managing finances is extremely crucial. For a lot of start-ups, the shortage of funds is nothing new. However, they also have to accelerate their business at full speed with these funds. This can be a difficult proposition for many, especially without the right personnel. CFO services for start-ups are among the most critical resources the business needs to succeed. Here, the right CFO partner can help judiciously utilise the funds so as to ensure maximum return.
Often start-ups don’t hire CFOs as they fear the expense will be too high. Here, instead, they place an accountant or financial manager in charge of all business operations. This is often what results in financial difficulties in the early stages. An accountant or financial manager does not have the required expertise and knowledge to oversee all business operations. On the other hand, timely appointing CFO services for start-ups reap long-term benefits and often pay back the Company far more than their fees.
Unlike an accountant that only tallies the numbers, a CFO performs several roles. They help with budget planning, overseeing all expenses, financial reporting and forecasting, and a whole lot more. These functions are especially crucial for a start-up as they have limited funds, to begin with.
Full-time and Virtual CFO services for start-ups:
There can be no better guiding force than an involved CFO in a start-up. However, budget constraints can make it difficult to have a CFO on the payroll. In such a case, virtual CFOs can also be appointed. This innovative concept allows start-ups to receive the expertise of CFOs without having to worry about a monthly salary.
Here, start-ups can seek out expert CFO services to help them with their finances and strategic decisions. However, instead of a job appointment, this works more in a consultant format. Start-ups can reach out to the CFO anytime they desire and for all their queries at a fraction of the cost. In addition, several modern CFO services include a pool of expert CFOs thus allowing start-ups to benefit from expert advice at every stage. And the start-up only needs to pay for the services they use. This is the perfect fit for business with low funds looking for expert help.
Keep in mind that the business decisions in the early days are critical as they determine the future of the business. Rashly using the funds too quickly can put a stop to the business before it takes off. Similarly, an extremely conservative approach can let many opportune moments slip by. A CFO is able to help you navigate through these decisions optimally to ensure maximum returns at every stage.
Role of CFO services in Start-ups
CFO services play an important role in every business, especially start-ups. Here, are some of the functions they provide:
CFOs plan and devise budgets for all departments. Often, lack of communication in start-ups can lead to funds being used very fast and in a haphazard manner. As the CFO has a deep understanding of all different departments, they are able to devise budgets that optimise fund allocation. Every expense here is noted and authorised as per their contribution to the company. Adhering to a budget and maintaining a proper record of all expenses and incomes also helps boost investor confidence, an important criteria for a start-up.
Financial statements and forecasting:
The creation of accurate financial statements is critical for every business, but especially for a start-up. Budgets and financial progress needs to be reported in the right way and at the right times. For an accountant, overseeing the entire business operation and reporting all the facts can be difficult. This can lead to lack of information, often resulting in inaccurate representation. On the other hand, CFO services for start-ups ensure correct and regular reporting of financial statements for a clear picture. In addition, they also perform extensive growth forecasting and analysis to support strategic decisions that best enable business profitability. All of these factors can play a huge role in stabilising the business as well as boosting investor confidence to raise more funds.
Setting up KPIs (Key Performance Indicators):
Often in a start-up, everyone is handling multiple roles. While this is critical to get maximum work done, sometimes it can also let critical actions slide. Also, as several people are responsible for the same task, there is lesser accountability for each task. A CFO is able to set-up clear and achievable KPIs for each department to ensure that all important functions are taken care of.
A healthy cash cushion is crucial for a start-up. Just like having some cash on hand works well in an emergency situation, start-ups often rely on cash and liquidity to boost their business. Here, it is critical to know how much cash to have on hand and how best to utilise it. A common problem faced by start-ups is how fast they burn through their cash. CFO services for start-ups can identify the required amount f cash to have on hand to grow the business. In addition, clear budgets can also state how the cash is to be used for maximum returns. Keeping too much cash is also not ideal as companies lose out on good investment opportunities. Knowing the right amount of cash and maintaining it accurately is the trademark of a great CFO.
Every industry has certain requirements by Law regarding financial, legal and taxation regulations. Staying compliant with each of them is critical to succeed responsibly and avoid any trouble later on. Accountants and financial managers may lack the knowledge of these regulations. Further, renewals of compliances and being aware of new regulations can be quite tiring and time consuming for the CEO or senior manager. Here, a CFO can prove extremely beneficial. Not only do they possess the knowledge of all compliance obligations but can also renew them timely. This enhances credibility of your business while also keeping you out of trouble.
Thus CFO services for start-ups are extremely critical to ensure that the business grows in a stable and sustainable manner. With options such as Virtual CFOs, hefty payrolls are no longer a concern. Expert advice and guidance from the right CFO can set your business on the right path from the start itself by avoiding costly mistakes.