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The possibility and benefits of hiring a CFO on a budget
Most start-up founders aren’t business moguls. They’re not operations experts, marketing specialists, or accountants, yet they often find themselves having to be everything to everyone, all of the time.
With minimal funds to hire experts in all the domains it takes to make a business succeed, they often resort to shouldering the entire burden on their own.
While this approach may work in the short term, it can quickly become a recipe for burnout. In addition, failure to bring in the appropriate support when it comes to managing your finances (in particular) can actually hinder your chances of success.
For any business, and especially for start-ups, cash is king. Sustaining cashflow ensures the business stays solvent and continues to trade, while maintaining “clean” records and data, allows founders and potential investors to gauge the performance of the business with real time data.
Yet, there’s more to good financial practice than effective cashflow management and tax compliance. Beyond the basics of bookkeeping and accounting lies a treasure trove of value that is quite often neglected by many start-ups.
HOW CAN A CFO HELP YOUR START-UP?
A Chief Financial Officer (CFO) manages the strategic financial elements of a business. They use historical data to look into the future so they can devise plans that will ultimately help the business grow and thrive.
CFOs commonly spend their time on activities such as:
- Budgeting
- Cashflow forecasting
- Business planning
- Investor or lender negotiations
They may also provide advice on how to maximise return on investments, and are skilled in developing practical roadmaps and business plans that guide the founders towards achieving their vision.
It’s unfortunate that start-ups have the most need for this type of strategic support, but are the least likely to be able to afford it.
Fortunately, there are ways to engage skilled CFOs on an as-needed basis. Outsourced CFO services are a great way to access this strategic guidance without breaking the bank.
Outsourced CFO services shouldn’t replace that of a bookkeeper or accountant, as they play important roles on their own – managing essential activities such as invoicing, payables, reconciliations, annual tax returns, and so on.
On the flip side, paying an outsourced CFO to do any of these tasks is a huge waste of money. Ideally, they should be kept focussed on the big strategic picture, rather than the nitty gritty.
START SMALL AND MAKE IT COUNT
Even if funds are tight, engaging an outsourced CFO could be the best decision you make in your business. The key is to start small, and make every second of your engagement count. Over time, it’s likely that you’ll need them more often – and it’s at this point that you may decide to hire an internal CFO.
For example, you wouldn’t buy a car if you only needed it once a month; you’d take an Uber or a taxi instead. However, over time you may need to use the Uber more and so buying a car would start to make more sense. At a certain point, the value of a car will well outweigh having to arrange a ride every day. At whatever point this happens, the most important thing is that you always had a vehicle to get where you wanted to go.
Initially, you may choose to work with an outsourced CFO once a month to assist with business planning and budgeting. Eventually this could become once a week or multiple times a week…at which point you could seek to bring on a permanent CFO.
The value that a (great) CFO can bring to a startup cannot be understated. Not only do they eliminate some of the burden from the founders and help them to value their time better, but they can provide incredibly useful strategic direction.
If you don’t already have a skilled CFO, or the funds to hire one permanently, consider outsourced CFO services. You may soon find yourself in a more competitive position, with a better ability to attract investors, and on a definite path to success.
For more information
If you have questions or would like further information about any of the elements mentioned in this article, please reach out to your local RSM office.
