Let's figure out what a CFO does, what role he plays, whether it is worth hiring a CFO at the initial stage of a startup's development and what form of cooperation to choose with such a specialist.
CFO (Chief Financial Officer) is the financial director of an organization who is responsible for the movement of all financial flows and makes strategic decisions on them.
This is not just a top manager, but the brain center of the company. He monitors indicators, analyzes operational activities and market trends, makes financial forecasts so that the company's manager can make decisions based on reliable information.
In addition, the CFO is an example for other employees, who influences the entire company, spreading financial culture and literacy.
His work and ability to interact with departments determine how well each employee will understand their responsibility for the financial result.
A CFO creates a balance between what is possible and what is desired. To do this, he or she ensures that the company's money is spent on designated goals, based on the financial plan.
A CFO helps determine:
whether it is worth investing in a new project and developing it;
whether a new product will bring profit;
how quickly the investment will pay off;
which sectors of the business are the most promising and profitable.
The CFO's job is to unlock the company's potential and be the first to notice opportunities to improve productivity, optimize costs, and increase revenue.
To do this, a CFO tracks changes in various metrics, such as: customer satisfaction rates, relative market share, customer acquisition cost, customer retention rate, and others.
To properly analyze financial indicators, this specialist must also be aware of what is happening in the development of existing and new products, sales, and marketing.
Starting entrepreneurs often neglect the position of a financial director, believing that such specialists are needed only in corporations.
However, a CFO is needed for a company of any size, as soon as financial statements and operating activities appear. Thanks to him:
You will avoid unexpected debts, for example, if investments run out, and the startup has nothing to pay the bills with;
The company will not have to move at random - all decisions will have reasons and logic, the ability to see development prospects for several years ahead;
Efficiency will increase and processes will be optimized, because KPIs and metrics will not contradict each other.
They run out of money ahead of time, because there is no control over expenses or the calculations are incorrect.
It is difficult for a manager to manage the company and plan, since financial information is vague and unreliable.
The startup does not have a financial structure and strategy to grow and scale.
It is difficult for the company to expand or locate, since there is no assessment of tax and legal risks.
Partners do not understand whether they will be able to receive dividends and in what amount.
It is difficult to attract investors, because there is no financial model and reporting, or it is not organized.
Often, startup founders understand that it is time to deal with financial issues after the above problems have arisen. But all this can be prevented if you involve a CFO at the initial stage.
If you only have an idea, but your business processes are not set up, there is no point in hiring a CFO. But if you are already making a profit and attracting investments, it is worth inviting such a specialist.
A CFO will set up financial processes and help you manage your business competently, based on objective indicators. In order for a startup to grow and develop, a CFO:
will implement budgeting so that you can confidently look to the future and avoid many mistakes;
will establish control over expenses, and money will stop "leaking away";
will develop a strategic financial model and form a startup budget;
will prepare the business for a financial audit and organize finances to attract new investors.
The services of a CFO-level specialist are expensive, so startups at an early stage are hesitant to hire one. Although hiring a full-time CFO is not at all necessary. You can use the CFO on-demand service (on demand or outsourced) to attract a financial director when needed.
This service is suitable for startups that want to organize their finances, but do not yet have the opportunity to hire a full-time CFO. Many foreign startups work in this format while they are just starting out.
With the help of "CFO on demand", you can:
Create a financial system and establish management reporting.
Train staff, instill in them financial responsibility for their decisions and optimize financial processes.
Introduce strategic planning and budget management.
Get help when attracting new investments, auditing or monthly reports.
Consult on unforeseen financial situations.
It is not so important what you choose: a full-time CFO or the CFO on-demand service. The main thing is that you do not forget to keep your business finances in order.
After all, thanks to financial expertise from within or outside, money will go towards the tasks set, and you will be able to make informed decisions, remain competitive, forecast profits and develop promising areas.
Thank you for the informative and useful article. There were many answers to long-standing questions. Thanks to the authors for some details and explanations on finances.
The article helped me a lot in developing my business. The authors tried to reveal the very essence of the issue of financial activity. More information could have been added.
Thank you for the explanations on finances and strengthening the business. Much in this area remained unclear, but I hope that the authors will continue to delight us with useful articles.
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