Money is a vital resource for any business, especially for start-ups in their initial stages of development, when every shekel or dollar is critical to their continued maturation. Intelligent management of this resource may be the difference between achieving goals, or even dizzying success, and joining the grim statistics of similar failed ventures. The problem is that the cost of a full-time CFO is an expense most start-ups can’t afford. Another solution is required: the outsourced CFO.
The important benefits of an outsourced CFO
Outsourcing is a very popular concept in an era that demands maximum flexibility and efficiency in every field. When a business decides to work with an outsourced CFO, it enjoys several highly significant benefits.
Optimal money utilization rate
In a frenetic business reality, in which countless unforeseen events can happen at any time, a start-up that isn’t managed in a financially intelligent way may suddenly find that its funds have run out, forcing it to raise capital on inconvenient terms. The outcome may be a large payment for one financing solution or another (an amount that could have been used to develop the business), and in tough cases even a halt in operations due to a lack of cash and an inability to raise additional funds.
With a CFO, even one whose scope of work is limited, there’s no chance of this scenario being realized, as the professional makes sure that the so-called burn rate is one that leaves enough money for any need at any time.
Like money, information is a valuable resource. In start-ups that haven’t established themselves yet, every decision can prove critical—so it’s worth making them based on an up-to-date, detailed, and accurate financial snapshot. The external CFO provides decision-makers with all the relevant data along with any financial insights that are important to consider.
Optimally timed fundraising
Another significant benefit of an outsourced CFO is the start-up’s ability to embark on a fundraising round at the best possible time. The CFO also helps manage this important step and achieve its objective—raising the required amount under the best possible terms.
Peace of mind
Launching a start-up is a move characterized by great feelings of optimism and anticipation ahead of realizing a dream. Running a start-up, on the other hand, is a task full of worry and pressure.
Every hour of an external CFO’s work, and the mere knowledge that the CFO exists, reduces the pressure and eases at least some concerns—so that the company’s owners and managers can devote all their attention and skills to technological, marketing, and other necessary aspects on the way to success.
What are the responsibilities of an outsourced CFO?
It’s important to emphasize that while outsourced CFOs are not an integral part of the company, their responsibilities are comprehensive and significant—and if correctly chosen, they won’t hesitate to take on all the necessary financial responsibilities.
One field of responsibility is the start-up’s financial interface with the Tax Authority and other regulatory bodies. When all reports and activities surrounding income tax, value-added tax, etc. are entrusted to professionals, the risk of making mistakes or violating laws and regulations shrinks, and there are no unnecessary complications.
Another realm of the CFO’s responsibility is salaries, including social conditions, employee option and stock arrangements, and any related taxation issues. This is an important part of the company’s ability to attract and retain the best employees.
The fourth area of responsibility is the annual budget—preparing it and regularly monitoring its execution relative to plans. Advising on product pricing, supplier agreements, complex transactions such as mergers and acquisitions, and various expansion plans is another part of the CFO’s responsibility, as is preparing reports for potential investors and presenting the business to them from a financial point of view.
A proactive CFO
One of the main qualities required of any outsourced CFO is proactivity. It’s a complex challenge and certainly not an obvious component, because the CFO doesn’t work for the company but comes from outside. In fact, proactivity is one of the most striking differences between a CFO who contributes to a start-up and helps it move forward and overcome various obstacles, and one who just fills a role.
This quality ensures that pitfalls are detected long before the company encounters them, granting it the ability to foresee them and avoid paying a high price for inattention. Likewise, proactivity helps reduce uncertainty (an inseparable part of every start-up) and enables advance planning which in turn streamlines operations.
How is the scope of the CFO’s activity determined?
Another important quality of an outsourced CFO is the ability to be flexible in their scope of activity. In the life of every start-up there are times when the need for the CFO’s services grows—for example, ahead of raising capital and throughout the sensitive process. On the other hand, there may also be times when the CFO is less necessary—for example, when thanks to good work there are sufficient funds for the future and no special circumstances that require the CFO’s assistance.
A flexible CFO grants the start-up a particularly economical cost-benefit ratio, and if one considers the difficulty of avoidable expenses for companies at the start of their journey, it’s easy to see why this flexibility is so necessary.
When The-Founders are providing your CFO services, you can rest easy from every perspective: in terms of how suited the service is to your specific needs; in terms of professionalism; in terms of the professional’s commitment to you; and in terms of their proactivity and contribution to your start-up’s continued development.