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22 Jan 2020

Role of CFO in Startups



There is high risk involved in any kind of new business startup. One of the biggest challenges faced by any new startup is doing “more with less”. Startups operate on limited budgets and have to make every rupee they raise count.

Having an experienced financial professional with the designated title of CFO, who is responsible for running the financial and operational affairs of a startup, is far preferable than to not having a designated CFO. This provides a higher level of security, legitimacy and confidence for all stakeholders, including vendors, customers and investors. Role of a CFO in business startup can be summarized in below points

  • Trustworthy advisor and mentor- The CFO should be expected to communicate value from his experience and insights to other team members of the startup. A CFO may not be the source of all knowledge and direction, but the job of a good startup CFO is an active role focused not only on financials but also on the operational and strategic issues.
  • Technical expertise- Good CFO should have the sound knowledge about the business including financial & regulatory requirements. Cash strapped startups without the formal financial leadership of a CFO tend to pay a premium for such services.
  • Enhance investor activity- The reality is that investors and lenders simply feel more comfortable dealing with a high-level financial person like a CFO because most of them have a financial background.
  • Supporting business- A CFO play important role in dealing with important customers deal and assisting in structuring to mitigate the risk of cash flow or creating commercial requirements at a later date.
  • Record keeping- 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 and to keep a check on proper financial accounting framework. He identifies right IT driven financial platform to support scorekeeping function keeping in mind the growing requirement of business.
  • Business reporting- CFO should have in-depth knowledge of IT systems to meet growing requirement of data capturing & data mining. CFO should be able to present financials & non-financials key performance indicators as a part of monthly closing to business owner apart from presenting regular financial statements.

Benefits of virtual CFO

While the financial limitations of a startup are very real and understandable, not having a CFO can have serious negative impacts on the business. One solution to this problem for startups is to hire an outsourced CFO services provider. Doing so will provide the startup with the high-level financial and operational expertise at a lower cost than hiring a full-time CFO. Benefits of virtual CFO service are as below

  • Save money- Hiring a full-time CFO costs a lot to the company. In addition to a full-time salary, a CFO must continue their education to stay up-to-date with the latest financial trends and practices. With a virtual CFO, you can receive quality service without the cost of a full time salary, training and health and retirement benefits.
  • Quality of services- Professionals like virtual CFO work with various industries and have experience with nearly any situation. This assures the quality of services and allows you to pay attention to your core competency.
  • Reduced Financial Risk- When one person is responsible for multiple tasks it increases the chance of error. When it comes to financial matters, the chances of theft and fraud are also greater. Using a virtual CFO service significantly reduces the chance of errors, theft and fraud. Having an outside party handle your finances also allows you to catch potential issues you might have missed.
  • Independent Viewpoint- Virtual CFO is able to see things differently. By working with a company on contract, virtual CFO always has the big picture in mind. They will always have independent viewpoints and opinions to bear on a company’s difficulties.

Virtual CFO services at KGMC

We provide different variants of CFO Services to meet the requirement of every business types and assist in organized process controls while driving business growth & profitability. Our team of qualified and experienced CAs and CSs have diverse expertize in implementing best finance practices, strategizing business plans, raising funds, initiating growth strategies, executing performance management frameworks along with the usual finance functions. Our virtual CFO services include

  • Financial and management accounting framework with integrated process controls and quality score keeping
  • Seamless process automation by adopting various IT Tools.
  • Creating finance organization as center of excellence and as a key business driver with emphasis on people connect across other cross-functional team members & management.
  • KPI based management information system to help in management decisions
  • Managing daily sales outstanding and cash conversion cycle with strong linkage to material and financial supply chain
  • Capturing inherent and mitigating risk factors in business plans
  • Taxation and statutory compliance management

Our virtual CFO services provide a lot of value to small and mid-sized businesses. By utilizing these services, businesses will have valuable insight and advice into their organization, be able to make data-driven decisions, and scale their business effectively without the cost of a full time CFO.

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