Last Updated on January 2024
To young startups, managing finances can be overwhelming, leading to financial stress. That’s where virtual CFO services come in. With outsourced CFO services, you can get the right financial guidance to help you manage cash flow, fundraising, projections, and pricing to ensure your startup’s survival without the commitment of hiring someone full-time. This is ideal for businesses that have limited cash flow.
Learning from the right resources will help you seize opportunities and steer clear of financial pitfalls. But, so much has been written (and said) online about the winding road to startup success. So much so that it’s hard to know which resources to truly align with your industry and stage of growth, and when to tap on them.
It’s no surprise then, that there’s a 30% failure rate for startups within the first three years, despite the relatively healthy ecosystem in Singapore. According to a 2017 study by the National University of Singapore, 56.8% of startups are found to be “struggling”.
The right financial resource(s) – a Virtual CFO in most cases – can help you cut through the noise and maintain a healthy cash flow. Here are the key areas where such a resource can minimise financial stress and dramatically enhance your probability of success.
What Aspects Can Virtual CFOs Help Your Company?
Financial Systems
Good financial information is the cornerstone of sound decision-making. Data quality is only as good as the financial technology, process, and team that produces it. Job one of your financial leaders—whether a CFO, controller or both—is to establish the right systems and controls so you have a scalable foundation for handling all facets of financial management. The right CFO will have a proven process for establishing a finance system that will make your startup hum.
Cash Management
A well-managed cash flow is easily the most important planning activity for a startup. By actively using cash management tools to project cash flow, you’ll be able to take appropriate steps that ensure you have the cash to cover obligations. An adequate runway can also do wonders for your business when raising capital.
Fundraising
Whether you seek financing from an angel investor, venture capitalist or a bank, you’ll need to craft a compelling financial story as to why they should invest in your firm over the countless alternatives out there. You (or your CFO) will need to be fluent in the right “financial terminology” and have clean, current financial statements to present.
You will also need to demonstrate your progress to date, as measured by the key performance indicators (KPIs) that matter most in your industry and for a firm at your growth stage. Furthermore, you’ll also need a financial roadmap that credibly illustrates how you’ll leverage their capital to achieve your growth objectives.
Board Management
Your board of directors can be a tremendous source of advice and support throughout your startup journey. However, a collaborative relationship can’t develop if you don’t provide your board members with sufficient ongoing financial reporting and operating metrics. Their counsel relies on great data. A suitable financial advisor can help you develop board packages that encourage constructive board engagement.
Management Decisions
When determining the right incentives plan for the sales team, pricing a new offering, or selecting the most profitable niches to pursue, you’ll need accurate and useful financial data to drive key management decisions. Knowledge gained from these data will provide you with the confidence to take decisive actions.
Startups are incredibly dynamic and require the support of skilled CFOs who can stay ahead of your pace of change. A partner who will roll up his or her sleeves to provide a steady flow of relevant financial insights. Such a human resource should be engaged on an ongoing basis, but the reality is, that a full-time financial strategist like that is an expense that startups can’t fully capitalise on.
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