Only 25 percent of startups are highly successful and operational 15 years after launch.

The secret to these startups’ success is hiring the right experts. So, consider hiring a CFO for your new business to survive and thrive. The CFO will help avoid common cash flow problems that cause startups to collapse.

Here are nine compelling reasons to hire a CFO for your startup and what to look for in one.

Who is a CFO, and How Do You Find the Best One?

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A CFO is a company’s chief financial officer who oversees all its financial activities. The CFO is a top-level executive who directs the financial direction a company takes.

Here are some of the duties of a chief financial officer (CFO):

  • Financial planning and forecasting
  • Cash flow management
  • Handling all business taxation issues
  • Financial controlling, analysis, and reporting

Now that you know the chief financial officer’s duties, the next issue you’ll raise is how to find the best one?

Here are the key things to check when searching for a competent CFO.

Educational Qualifications

The level of education is one of the key CFO qualifications to check when planning to hire one. Look for a CFO with outstanding educational qualifications. Also, look for a CFO who is a graduate of a reputable school.

The idea is to leverage this CFO’s financial expertise to give your new business an edge.

Leadership Skill

A CFO holds the highest financial position and heads the entire accounting department. So, the person you hire for this role should have exemplary leadership skills. They must communicate effectively with the people below them and motivate them.

When interviewing candidates for the CFO positions, find out their leadership track records. Only consider candidates who have held senior leadership positions with well-established organizations.

Experience Level

As a startup, you need a CFO with a high experience level. An expert who understands common financial problems startups face and how to resolve them. Your goal is to leverage this CFO’s experience to avoid the pitfall that causes startups to fail.

Cultural Fit

You need to search for a chief financial officer who fits your company’s culture perfectly. A CFO who shares your company’s core values. Also, look for a CFO who has worked with companies in your industry.

Who is a CFO

Finding the right CFO is critical to your startup’s growth and success. A qualified CFO will help your startup find its footing and gain an edge over its competitors.

Here are some of the reasons why you should hire a CFO.

1. Professional Cash Flow Management

Many startups struggle to meet their short-term obligations due to inadequate working capital. Some of these startups are profitable but don’t have enough cash to pay for their current expenses.

Here are some of the causes of these cash flow problems:

  • Overestimating sales forecasts
  • Underestimating startup costs
  • Failing to create a cash flow budget
  • Expanding the new business too quickly
  • Impulse business spending
  • Low profits
  • Failing to track business expenses
  • Failing to protect the startup’s cash

If your startup has been facing these challenges, then it’s a sign you’re ready for a CFO. The CFO will help you develop a cash flow budget and track expenses. Also, the CFO will advise you on the best cash flow management tools to use.

Also, this expert will guide you in effectively managing account payables and receivables to have a positive cash flow. The idea is to prompt the debtors to pay you quickly and raise money for current expenses. Also, you need to negotiate with the creditors to extend the debt repayment periods.

Finally, a CFO will advise you when to consider working capital financing. The idea is to borrow money to cater to payroll and day-to-day operations.

2. Guidance on Securing Business Financing

27 percent of small businesses say accessing enough financing is their biggest challenge. Without funding, these businesses struggle to keep up with competitors and grow. Some are even forced to lay off key employees or sell vital equipment.

Hiring a CFO can help your startup overcome these funding problems. The CFO will educate you more on different types of business financing and how to apply for them. Your CFO will help you prepare the necessary business financing application paperwork.

The goal is to provide the right information to increase the odds of securing financing. When seeking funding, you want to showcase your startup’s financial strengths and potential. The idea is to convince lenders or investors that their investment will pay off.

Also, this expert will guide you on how to manage business finances effectively. You’ll learn how to undertake a cost-benefit analysis before incurring a huge business expenditure. The idea is to allocate business finances only to things that accelerate growth.

3. Risk Mitigation Advice

A CFO will help your startup with risk identification, evaluation, and mitigation. The idea is to highlight all the threats your new business faces and develop plans to manage them.

Here are some of the most common risks all startups face:

  • Financial risk
  • Strategic risk
  • Technology risk
  • Competitive risk
  • Reputational risk
  • Economic, environmental, and political risk
  • Market risk
  • Execution risk
  • Team risk

Your CFO will educate you on the best ways to manage these risks. They’ll guide you on high-risk business activities to avoid at all costs. These are activities that threaten your startup’s survival.

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To manage risk, the CFO will also advise you on how different types of business insurance covers work. The idea is to know the specific policies to buy, transferring the risks to the insurer.

Finally, the CFO will help you track the market and competitive risks to know the best ways to handle them.

4. A Reliable Negotiation Partner

You must learn to negotiate with different stakeholders effectively for your startup to grow. You need to negotiate with suppliers to reduce lead time and extend repayment periods. You’ll bargain with investors and lenders to offer more financing.

As a new business owner, it’s a nightmare to handle all these negotiations alone. Most likely, you’ll mess things up and get unfavorable negotiation outcomes.

You should consider hiring a CFO to help you with all these negotiations. The CFO will play the bad cop and push the other side to agree to your terms. Also, the CFO will educate you on how to gain and use leverage in every negotiation.

Finally, your CFO will help you strive for win-win negotiation outcomes. The goal is to form solid long-term relationships with different stakeholders. You want to solicit these people’s support to build a strong foundation for your startup.

5. Oversight in Strategic Planning and Execution

Many startups only have a vague idea of who they’re and what they do. They don’t have a clear mission or objectives. They don’t know how to track progress or what to do if things don’t go their way.

Your startup should hire a CFO to help you overcome these challenges through strategic planning. The CFO will help you understand your company’s strategic position by undertaking a SWOT analysis. The idea is to pinpoint and understand your startup’s strengths and leverage them to gain an edge.

Also, you’ll discover the startup’s weaknesses and threats to develop plans to manage them.

A CFO will also help you refine your business’s short-term and long-term objectives. The idea is to have the means to track the business’ growth. You want to know the direction your business is taking at all times to know the right action to take.

Finally, a CFO will help you execute, review, and revise your startup’s strategic plan. Your goal is to streamline the implementation of both short-term and long-term objectives. Also, you need to know when to revise your strategic plan to keep up with the changes in the business environment.

6. Enhanced Business Credibility

Business credibility is a startup’s currency; with it, the new business flourishes; without it, it goes under. Sadly, most new entrepreneurs don’t realize the importance of business credibility. And that’s why they don’t take any actions to create a positive business image and reputation.

Here are some of the reasons your startup should work on improving business credibility:

  • To increase credit opportunities
  • To increase business financing options
  • To attract the top talent to work for you
  • To get more loyal customers

You need to learn how to build business credibility to enjoy the above benefits. One of the ways you can improve your business credibility is by hiring the right experts. You want people to know that people working for your company have the right qualifications and skills.

So, to inspire trust when seeking financing, hire a qualified CFO. Investors and banks feel more secure providing funding to startups with a CFO. They know that these experts will make sure that startups allocate the money to productive activities.

7. Oversight in Statutory Compliance

Many startup owners have limited statutory knowledge, and they need guidance. They need help adhering to company law and filing their taxes on time. The goal is to avoid legal problems in case of an audit.

Hire a CFO to oversee statutory compliance. The CFO is well versed in statutory business requirements and ensures you follow them. Also, the CFO will guide you on various government programs that support startups.

You want to utilize programs such as SBA loans to access financing for your new business. Consult your CFO to find out the eligibility requirements for these loans and how to apply.

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8. Reliable Record Keeping

A CFO is the head of the finance department and will oversee all accounting activities. They’ll ensure that books of accounts are prepared and reported on time. The CFO will reconcile your accounting records to ensure you get accurate information.

Also, they’ll oversee the preparation of different financial statements. The goal is to provide you with timely and accurate financial and accounting reports. These reports will help you evaluate your startup’s performance at a given moment.

You’ll have data that shares insights on whether the business is heading in the right direction. With this data, it’s easy to make informed business decisions that accelerate growth.

9. Help Evaluating Your Startup’s Financial Position

One of the biggest challenges new entrepreneurs face is determining their businesses’ financial standing. They have no idea how to value their new startups or the right financial direction to take. They’re confused about what to make of the revenues their companies generate and how to boost profits.

Hiring a CFO can help you overcome these challenges and learn to evaluate your startup’s financial position. The CFO will help you know when your business has a strong financial standing and when it’s viable to expand. Also, they’ll caution you against investing in risky ventures that threaten your financial position.

Furthermore, a CFO will help you analyze the startup’s revenues and advise you on what you can do to increase them. You want to know when to go all out to grow your market share and when to hold back.

Hire a CFO to Increase Your Startup’s Odds for Success

As a smart startup owner, you know the odds are against you, and you need professional help to change them. So, hire a CFO to enjoy all the above benefits. The CFO will help you with strategic planning and improving business credibility.

Also, they’ll oversee cash flow management to ensure your new business has enough working capital. Finally, a CFO will advise you on your new business’s financial position and how to accelerate growth.

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