When to hire a CFO and 4 reasons why startups need them

As the founder of a startup, some of the pressing day-to-day responsibilities involve building your brand, hiring the right talent, and ensuring the steady flow of business. In the midst of all this, it can be easy to overlook adept handling of finances, and its related operations.

As the startup continues to grow, so will your financial planning requirements; making the need for a seasoned professional to manage your finances inevitable.

Industry experts recommend opting for CFO services when your business hits growth of 20-25 percent compounded annual growth rate. Furthermore, when making the decision to hire a CFO, you need to have the right growth strategy in mind. You need to ask yourself: what is your growth plan, and how important is getting the right financial strategy in place to achieve your goals.

It is also important to address financial planning during the initial days of your operations, which include short terms investment decisions, assistance and evaluation of deal structures, as well as, managing the deal's potential risks and due diligence process.

As a solution, hiring a CFO becomes imperative to handle these aspects of your business. Furthermore, by investing in a CFO, it eases the process of interactions with external investors, bankers, board members, and other stakeholders, owing to their knowledge of the sector.

In addition, by hiring a CFO, it ensures that as the founder, you have the bandwidth to drive innovation and product development, leaving financial matters to the experts.

Here is how a shared CFO can be beneficial to a startup:

Future planning

As a CFO, one of their core areas of expertise is the ability to read and analyse balance sheets and forecast growth trajectory. Using this knowledge, they are best placed to guide you in your investments, due diligence, hiring plans and overall financial management of your organisation. This can greatly aid in helping achieve the goals of the startup, and ensure streamlined functioning and greater growth.

Fund Management

As the founder and CEO of a startup, hiring a CFO to manage long and short term cash flows is one of the wisest decisions you can make. Their knowledge of accounting and book-keeping will be crucial in keeping tabs on expenses, guiding you towards making the right business decisions.

Furthermore, as your business grows from merely monitoring transactions to financial analysis, a CFO is essential to ensure complex transactions are handled correctly.

Formulating Financial Strategy

A shared CFO can greatly influence the growth of a startup. Through valuable inputs, implementing financial planning, and customer analysis, a CFO can work out a growth plan based on metrics. Furthermore, a CFO is in the best position to implement and improve best practices for unparalleled growth.

Timely reporting and statutory compliances

With extensive experience in the financial sector, a CFO is best placed to handle statutory compliances, as well as ensure timely reporting, thus safeguarding your startup from regulatory action. By having a dedicated CFO on board, it will go a long way in ensuring best practices are followed, aiding the growth of the company in the long run.

In times of economic uncertainty, a CFO is one of the greatest assets a startup can have to help you plan your financial roadmap. Be it aiding with financial restructuring, or chalking out a recovery strategy, a CFO is best placed to help a startup recoup. That being said, it is important to note that a full-time CFO can be a very expensive resource.

For a startup, shared CFO services are financially viable. A firm can save over 60 percent of the costs involved by employing shared CFO services. Further, you can also benefit from their network, as well as a vast knowledge of best practices across sectors.

So, irrespective of whether you opt for full-time or shared CFO services, the benefits are multi-fold. From improving financial stability, to implementing strategies, and bringing in credibility to the startup, there is a lot they bring to the table.

Over the last few years, they have definitely established their credibility in the market, and this will only increase, cementing their position as a valuable asset to any startup.