What is the role of a CFO in a Startup/SME?


There are multiple reasons why a business fails; one of which is that they run out of cash. With the advent of globalisation, businesses aspire to grow beyond their local, regional & national boundaries and in the process sometimes over stretch themselves in terms of reading market opportunities, management bandwidth. This is where the Chief Financial Officer needs to play a crucial role as a business alert which comes out of reading financial numbers, sometime in between the stats.In the above context let us analyse the role of a CFO:

Scorekeeper:Basic financial accounting & record keeping in a very hygienic way is a must. A CFO needs to put in place systems, processes & controls at each level of revenue & expenses. It is very important to identify the right in-house finance team skill set or manage via an outsourcing agency to keep a tab on proper financial accounting framework. It is important to identify right IT driven financial platform to support scorekeeping function keeping in mind the growing requirement of business with lot of play around data mining.

Technical know-how: Good CFO should have the sound knowledge around business, its financial dynamics &regulatory requirements across tax/commercial/banking/exchange regulations around. He not only needs to control this aspect but report and deal with the plethora of compliances on a regular basis.

Supporting business:A CFO should play important role in dealing with large/important customers deal and assisting in structuring to mitigate the risk of cash flow or creating commercial exigencies at a later date. He should drive this by applying his financial & commercial judgement based on sound business practices with emphasise to business owner on right kind of “chemistry” to manage customers expectation. Written business agreements should be properly vetted by a CFO to guard against any risk on terms agreed on commercial & business malfunctioning. He should play a role of cheapskate and should be saying “No” a lot when required.

Business reporting: Today’s businesses are driven on information highway. CFO should be IT savy with in-depth knowledge of IT systems & information architecture to meet every growing requirement of data capturing & data mining. CFO should be able to present financials & non-financials KPI’s as a part of monthly business closing to business owner apart from presenting regular financial matrix on profitability, balance sheet health and cash flow analytics.

In startups, CFO can play a role of advisor or counsellor and as the business shows sign of growth or hyper growth stage, he should be roped in on part-time/shared basis to bring in orderly & control centric growth. Also,while finance is a non-core function to business, CFO plays significant role in rolling out discipline across organisation based on the “power of numbers” which brings valuable insight to the business owner at appropriate time in “correcting” business strategy & direction.

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