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Every early-stage startup founder wants a company that rocks it from the first round of funding and requires a strong team to do it. However, staying lean also means you need to make hard decisions over what roles to hire for, and a CFO is usually at the bottom of the pile due to the salaries they command.
That being said, a CFO can provide truly transformative strategic advice for startups at any stage and can give your business a competitive advantage. So the question is: When is it financially viable for your startup to hire a CFO?
The CFO Question
It’s important to first understand what you don’t need a CFO for. Most startups in the process of seed funding can handle their basic transactions and record-keeping on their own. Any bookkeeper can manage this sort of work.
The difference between a bookkeeper and a CFO comes down to being reactive vs. being proactive. A bookkeeper’s role is to record all of your transactions for you. A CFO, on the other hand, can provide you with transformative strategic advice. And it’s never too early to begin financial strategizing.
For a Series A Startup, keeping a handle on your cash runway is a key factor to success. A CFO can ensure that runway doesn’t collapse while you’re trying to achieve takeoff.
The CFO Solution
So we know that CFOs can be amazing for a startup still looking for seed funding. Why aren’t they then more common in Series A Startups? Often, a company interested in startup funding may not have the funds to take on a CFO at that stage.
However, this doesn’t mean that a Series A Startup needs to go without a CFO. Outsourcing your CFO needs can get you valuable strategic planning at a time when you need it most. By outsourcing, you also sidestep the tight budgets often associated with that phase of establishing a business.
Hiring a CFO full-time will typically cost your business $350,000 or more in a single year. The cost for outsourcing CFO services varies depending on how much you use them. This gives you much more control over their price range, which will normally place at $15,000 - $150,000 in a year.
What Can an Outsourced CFO Do For You?
So what exactly can an outsourced CFO do for your startup? A good CFO will give unique solutions and advice based on the needs of your startup, helping get it through to the next round of funding. These include the following;
To make financial decisions, you need to have an understanding of your finances. A CFO can take your bookkeeping beyond simply tracking cash. A CFO can get your business running on Accrual Accounting, which provides a more accurate snapshot of your startup’s finances.
A CFO can also help with difficult tasks such as Tax Reporting, as well as implementing superior accounting software. All these steps help make your accounting much more understandable, for yourself and the government come tax time.
Not only will an outsourced CFO be able to give you a better picture of your finances, but they will help you make the best financial planning decisions for your startup. A good CFO can give you Performance Targets to meet that will provide a guide for your business through the various levels of funding.
A CFO can also provide a Rolling Forecast, that uses your historical data to predict your future numbers - invaluable when you are making spending decisions. An outsourced CFO can also provide Variance Analysis, informing you of any differences between your planned numbers and your actual numbers, identifying exactly where your business is not performing as expected.
An outsourced CFO doesn’t just enhance what your startup can do on its own, but also how well your startup connects with the ecosystem of its chosen industry and fundraisers. An outsourced CFO can put you in contact with new sources of fundraising, as well as strategically selected partners for mergers or acquisitions. The outsourced CFO can also give you key information on your industry, to let you better determine pricing strategies.
Want To Learn More About Outsourcing CFO?
It’s no surprise that we are enthusiastic about outsourcing CFOs, considering that this is our specialty. We’re proud to have helped many startups unlock their full potential and power through multiple series of funding.
At Punch Financial we specialize in providing high-growth companies with a modern accounting experience. Instead of hiring an in-house CFO at great expense, you can outsource your strategic needs to a firm with proven results for a fraction of the cost.
Our mission is to help you streamline your back office and to provide you with actionable data and reduce your overhead. Let’s connect to give you a customized quote and free consultation. You have nothing to lose but so much to gain.