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How can a virtual CFO help your business?

In present day, the role of a CFO has evolved from mainly controlling finances and mitigating cash flow problems to one that injects strategic business perspectives as well. Having a finance veteran as CFO helps guide the company towards long-term profitability and avoid costly mistakes that inexperienced founders may unintentionally make. However, with most start-ups running lean and curtailing cash outflow, especially amidst a pandemic, the salary costs of hiring a full-time CFO comes across as daunting and unnecessary. To some, it seems akin to engaging a trawler for a weekend fishing trip.

Thankfully, start-ups can now hire virtual CFOs that bring the skills of a finance veteran at a fraction of the cost of employing a full-time CFO. While most start-ups are focused on developing their selling proposition and fighting to gain market share, the accuracy of the business’s financials and accounts are often overlooked. A virtual CFO value adds by maximizing a firm’s value and establishing a sound reporting system that is crucial when communicating and pitching to investors. Furthermore, they can help to raise the right type of capital and manage external investor relationships. A looming recession and uncertainty arising from Covid-19 make such a service even more valuable.

According to a report by CBInsights, Global CVC-backed funding fell by 20% yoy in 2Q2020. (CB Insights, 2020) EY US Venture Capital Leader, Jeffrey Grabow also shared his expectations on deal activities slowing down in the near future with investors being more selective in their investments as well as an inclination to reinforce their existing portfolios. (Grabow, 2020) Additionally, banks are also being more cautious in extending loans (Trading Economics, 2020) given the higher provision for bad loans and a reducing net interest margin. However, there are still positivity and opportunities beyond the gloomy forecast, as a new white paper by Phoenix American reported record levels of dry powder, which must be invested in time to come. (Phoenix American, 2020) Ultimately, investors are looking for firms that demonstrate the ability to weather economic storms and thrive in the new normal. As such, it is best for start-ups to overcome this circumstance via the help of a team of finance professionals.

Start-ups engaging a virtual CFO also have the additional benefits of tapping on a broader skillset. Instead of only leveraging on the personal skills and experience of the full-time employed CFO, businesses can enjoy the combined expertise of the finance team employed as an interim CFO. Start-ups often overlook the exposure to a wider network when engaging a virtual CFO as well. With a team of finance experts looking to raise funds for the business, it increases the company’s visibility and chance of securing funding.

Much like wind is to a floating kite, the CFO plays a viable role in scaling a business. While many businesses are concerned with getting by this economic storm, it is a good time to seek professional advice when it comes to making the right cost cutting measures or managing the firm’s cashflow.

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