CFO Services for Startups: The Secret to Explosive Growth

Written by Amanda Bower    |    Published: October 6, 2022

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when to hire a cfo

As the U.S. and global economies move toward a new normal following the pandemic, startups are expected to play an important role. According to the World Economic Forum, funding for startups shattered previous records in 2021, with investors providing more than $600 billion for new companies. In spite of the money being invested in these companies, the founders of startups often struggle with the intricacies of the financial side of the business, such as providing benefits packages that can help them retain highly skilled employees, determining if it is a good time financially to introduce a new product into the market, or even staying in compliance with increasingly difficult government financial regulations.

How Is a CFO Different Than an Accounting Team?

An accounting team provides services necessary to ensure that the company’s bills are paid, its payroll is done properly, and its finances are compliant with local, state, and federal requirements. However, a Chief Financial Officer (CFO) provides an expanded number of services focused on the company’s future, such as:

  • Creating reports that compare the company’s profitability with targets that the founders create
  • Using data to suggest ways that the company can increase its potential
  • Analyzing the financial viability of new products
  • Continuous financial planning and analysis to assess and meet the company’s current and future financial needs
  • Identifying opportunities where investors can help the company grow

What Does a CFO Specifically Do That Impacts Growth?

 The CFO has influence across departments from sales, finance, marketing, and legal as they provide the short- and long-term forecasting needed to ensure that growth plans are implemented efficiently, properly, and at the right time.

The CFO helps a startup remain agile, stay protected, and mitigate risk by analyzing financial data and putting controls in place to avoid error and fraud. They also provide support with vendor negotiations and other contracts.

While founders may have experience providing a particular product or service, many do not have the financial expertise that a CFO can bring to truly accelerate growth at a company. A CFO can help founders make informed financial decisions while giving them the bandwidth to focus on the things that they do best.

Can a Startup Get Away With Not Having a CFO?

The best time to secure CFO services for a startup is right from the beginning, planning phases of the company. However, some founders may opt to handle the finances themselves in the early days. Perhaps they rely on accounting software that can provide them with reporting and tax capabilities, but they’re still managing the bulk of the responsibility on their own.

While this may work in the short term, the accounting needs of a company become more complex as the business grows, new employees are added, and there becomes a need to improve retention by providing benefits. At this point, a founder who may not be well-versed in accounting often becomes overwhelmed. This is when it’s time to look for full-service accounting services and the assistance of a CFO.

What Are the Signs That a Startup Needs CFO Services?

If you’ve been handling the finances of your startup or have left these tasks for a small, in-house accounting team, there are certain signs that it might be time for outsourced CFO services. Here’s what to look for.

 

Founders are spending too much time and energy on finances.

Startups begin with an idea, and the ability of the founders to take that idea and advance it to the market. While financial considerations are a major aspect of the ability to advance the idea, many founders find that managing the company’s finances takes so much time and energy that there is little gas left in the mental tank or time left on the clock to work on the many other factors of creating growth and opportunity for the company. In fact, 40% of surveyed business owners say that finances are their least favorite part of owning a company.

Hiring an in-house accounting team is too expensive.

Hiring new employees is not only a time-consuming issue – requiring creating compliant job descriptions, conducting interviews, and providing training – but also an expensive one. The world of online workplaces is one where employees have an increasing number of work options, including remote working options. In order to compete, employers have to get creative and competitive about the benefits they offer.

It is often a surprise to business owners inquiring about CFO services to learn that they can obtain these quality services from financial professionals for far less than the cost of hiring, training, and adequately compensating their own in-house accounting team.

The company isn’t growing as quickly as you’d like.

CFO services can include assistance in developing a growth strategy by considering market trends and analyzing costs. A CFO can help you bolster your existing business plan, as well as determine where you can cut costs.

3 Questions to Ask When Working With a New CFO

When working with a new CFO, here are some important questions to ask to ensure that you’re getting the services you need.

1. Can I see samples of customized reports?

Many outsourced CFO providers use a one-size fits all approach. You don’t need a CFO to tell you that your business is unique; they need to show you that they understand the unique needs of your business.

2. Do you have experience working with startups in my industry?

Just as no two companies are exactly alike, the needs of companies in one industry are vastly different than the needs of another industry. For example, there are different government regulations for a company involved in healthcare than there are for companies involved in software. It is important that your CFO has knowledge of your industry’s rules in order to ensure your compliance with those rules.

3. Do you have references?

If you’re hiring individuals to join your in-house accounting team, you’d want references to determine if the applicant has the experience to do the job and a personality that is a good fit with your company. Your expectations should be no less when selecting an outsourced CFO.

CFO Startups: The Key to Growth

The key to growing a startup is to understand the impacts of past financial decisions, while also keeping a focus on the future of the industry and the continued need for the product or service you’re offering. A CFO is able to provide this expansive look and the reports you need to ensure you stay on the road to success. To learn more about what an outsourced CFO could look like for your company, contact hiline.

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