As an entrepreneur or small business proprietor, you may have responsibilities in operations, marketing, sales, product development and other things. However just about the most major roles which are oftentimes ignored and minimised early on is financial strategy and management. A full time, in house CFO can be a pricey investment that lots of smaller companies can not afford or even do not need at this time in their growth process.
But when your company begins gaining traction and growing real fast, the financial complexities multiply. Obtaining funding, strategic planning, controlling cash flow, financial reporting & compliance, tax optimisation and investor relations become more demanding. This is where outsourced CFO services or Virtual CFO services can be a lifeline – injecting financial knowledge and direction without the full-time overhead associated with a permanent hire.
When Does Your Company Need Virtual CFO Services?
The question is how do you know when you should engage Virtual CFO services? No single employee headcount or revenue number makes the decision for you. Each business has different requirements and conditions. However there are certain indicators and inflection points where companies benefit from Virtual CFO services and their financial leadership.
Early Seed Stage
Even pre-revenue startups could benefit from Virtual CFO services early on when mapping out their funding approach and financial model to pitch to investors. An outsourced CFO can help make you a financial story, map a path for utilising capital efficiently and position the venture for greater growth and investment potential.
Seed to Series A
As startups get initial backing and pursue seed or Series A financing rounds, the finance and accounting demands increase. Virtual CFO services can prepare for due diligence, prepare pro forma financial projections, advise on equity structure and capitalisation techniques and interface with investors and board members. They can also establish sound financial infrastructure, processes and reporting systems to create confidence in backers.
High Growth Phases
Any company with a spike in growth and expansion demands better financial management and forward planning, irrespective of revenue size. Periods of fast scaling, aggressive hiring, new industry entries, acquisitions, etc. call for the strategic financial acumen that experienced Virtual CFO services bring. Virtual CFO services can swiftly inject the required guidance and governance without getting mired in recruiting efforts.
Common Scenarios for Using CFO Services
Generally correlated with revenue levels and growth phases, however there are different common scenarios and triggers that offer a good fit for adding Virtual CFO services and their financial leadership through contractors or consultants:
- Fundraising/Investor Relations
Preparing for and managing funding rounds (seed, Series A, Series B, etc.), investor communications, board reporting.
- Mergers & Acquisitions
Target assessment / due diligence / deal structuring / integration planning.
- Financial Compliance and Reporting
Setting up accounting processes, tax planning, audits, internal controls, financial modelling.
- Capital Projects
Capital raising, spending planning for significant investments, expansion, equipment purchases.
- Executive Mentoring and Coaching
Training and development of internal finance team members, succession and continuity planning.
- Interim Leadership and Project Work
Filling temporary leadership gaps or even supporting major finance initiatives and integrations.
The range of situations shows how flexible, obtainable Virtual CFO services can be invaluable for businesses at every stage of growth. Having interim or outsourced CFOs available at critical points saves startups and growth businesses from having to over-hire or under-use this executive financial skillset.
Why Use Virtual CFO services for Small Businesses
For smaller companies and cash-starving leadership positions, an outsourced, contracted CFO might look like an unwanted luxury acquisition. After all, wages & fees for CFOs, even interim, could run into the tens of thousands a month/project. But such an investment tends to yield huge dividends in:
- Financial Strategy and Foresight
From long range cashflow forecasting to capital modelling, CFOs map economic scenarios to inform business decisions.
- Risk Mitigation
Proper controls, processes, governance and compliance enacted by CFOs reduce financial and legal exposure.
- Investor Support Funding
Experienced VCFO services online present financial credibility and strategic finance leadership that investors and boards value from CFOs.
- Operational Optimisation
Online VCFOs review operations for cost savings, efficiency and opportunities to leverage capital.
- Mergers & Acquisitions
CFO expertise is essential for target evaluation, deal structuring and economically smooth integrations.
- Exit Planning and Wealth Creation
Founders and owners turn to best online VCFO services to maximise valuation and wealth from exits and liquidity events.
So adding an external CFO perspective provides financial governance and oversight to drive growth, create value and avoid costly mistakes. For growth businesses yet to employ a full time CFO, fractional CFO consultants represent an intelligent, inexpensive route to this powerful skillset.
Making the Most of Outsourced CFO Model
These are best practices for companies looking to make use of contracted CFO services:
- Engage early – don’t hold out for a crisis to get CFO experience.
- Define clear goals / KPIs for measuring impact / ROI.
- Use the experience and knowledge of the consultants.
- Promote good relations between CFOs and internal teams.
- Plan for continual finance leadership needs as you scale.
Conclusion
With some advanced planning and the right engagement model, outsourced and interim CFO services can help startups and growth companies accelerate their ambitious objectives. The affordable ability to add world class financial leadership and strategy when needed can help deal with complex transitions and inflection points. The competitive advantage delivered by such best financial governance often outweighs engagement costs for many growth businesses.
FAQs
1. Can startups with less revenue benefit from outsourced CFO help?
Yes, pre-revenue startups can utilise CFOs for financial modelling, financing plans and investor pitches and due diligence.
2. How can interim CFOs support fundraising and investor relations?
Interim CFOs create fundraising materials along with financial models and advise on strategic advisors during financing rounds.
3. Can outsourced CFOs assist with acquisitions and mergers?
Contract CFOs lead M&A in evaluating targets, due diligence, negotiating deals and ensuring financial integration success.
4. What financial infrastructure can the interim CFOs establish?
VCFOs establish accounting procedures, internal controls, reporting, forecasting, modelling and systems for payroll, HR, etc.
5. How do businesses determine whether interim or outsourced CFO services are worth it?
Determine the possible financial upside, operational efficiencies and risk mitigation that strategic CFO leadership can offer.
