Yes, You Need a CFO…

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Last week I had practically the same conversation with two different startup-founder friends:

“We’re stretched really thin. Do you have any advice on hiring a VP of [X: marketing, people, product, operations, etc]?”

My response …

“You’ll think I’m crazy for saying this, but I think you need a CFO.”

Most startups and small businesses kick the can on hiring a CFO-level resource until they’ve hit major growth mode. Until then, the idea is that a bookkeeper or controller can handle the day-to-day until the company is large enough to be metrics-driven. The problem with this ideology is that the strategic finance – fundraising, strategic planning, budgeting/forecasting, investor relations, and so on – fall on the shoulders of the Founder and/or CEO. Likewise, the Accounting is often not at all connected to the strategy and plan the CEO designs, so tracking, measuring, and reporting success or failure is virtually impossible.

We advise clients that if you’re at a $1MM annual revenue run rate, adding a finance professional to your executive team will probably save you more money than you pay for that resource. And they’ll save you time, as well. Better yet, using a seasoned Fractional CFO service (yes, like ours), will save you even more – you get the seasoned expertise and resource for less than hiring a permanent resource in-house.

An experienced finance executive will:

  • Take the job of managing the accounting and/or bookkeeping staff off of your plate.
  • Ensure your accounting infrastructure is built around your operations and is up-to-date with the latest and greatest GAAP pronouncements. This is especially important if your organization is seeking funding from investors and/or lenders.
  • Build an operational model for you that is cash-flow based, up to date, detailed, and connected back to the GAAP accounting that you need to produce proper reporting on the results of your business. Your board of directors, especially, will require this as they want to be able to quickly assess the health and growth of the business beyond the traditional financial reports (i.e. P&L, Balance Sheet, Cash Flow Statement).
  • Improve your processes all around, and take off of your plate, negotiating with vendors and paying invoices.
  • Build a strategic model (connected back to your operational model & GAAP accounting) that will make investor and lender conversations a lot easier. These stakeholders will fund you faster at better valuations/rates if the financial performance of the company is truly transparent.
  • Help better manage treasury and liquidity. Having a detailed operational plan will help you have access to lines of credit versus having to equity fund-raise too early. This keeps you from being so cash constrained that you’re starving your growth just to run the place.

The above list isn’t all inclusive – there is certainly allot more to be gained. All these things are really, really valuable – they have a tangible cost to the business if left unaddressed. They’ll help you know where your money is really going, where you can save money, and where are the biggest drivers and drains on your cash-flow. Armed with this resource, CEOs can make informed, actionable decisions much more quickly and can take advantage of opportunities and address weaknesses much faster. This is the lighter-fluid that ignites the fire of growth even faster.

And one last thing…the above doesn’t mean you need fancy accounting software or an expensive BI database. Quickbooks and Excel will work just fine and get you the same data. It’s more about having the resource to manage it all for you, leaving you solely focused on continuing to grow the business.

So, where do you find this resource? Well, give us a call…we’ve been where you’re going and can put the above into place for you. Link: Align Finance Services