Running and managing a startup is an ordeal, and startup owners know all about it. They handle a million things every day to ensure their business doesn’t go belly up. Amidst this startup hysteria, many business owners lose sight of their finances, falter, and fail.

As per a recent US Bank survey, a total of 82% of businesses fail due to improper cash flow management. With numbers like these breaking havoc online, one may think entrepreneurs would pay heed to finances, yet still, the majority don’t. Why is that?

That’s because most startup owners don’t even know why managing finances is so critical or what a good CFO does in a startup? People falsely believe business success is all about innovative ideas, staying one step ahead of the competition, and being inimitable.

Undoubtedly, those factors enable you to attain success, yet it is hard to sustain success without paying attention to finances. That’s precisely what CFO or Chief Financial Officer does. They keep an eye on your numbers while you keep your complete focus on growth.

With that, let’s dig deeper into the world of CFOs. Let’s understand who they are, what they do, and how they can help your business level up.

What Does a Good CFO Do in a Startup?

A CFO is a person who manages the financial side of your business. They do everything from cash flow management to financial planning and analysis. Their role is to give you a clear-cut insight into your finances, help you manage the funds, and secure more via loans or investments.

It wouldn’t be wrong to say that a CFO is more like a controller or treasurer. However, it would be a sin to say that check-and-balance is all they do. A good CFO wears many hats. They are change agents, business strategists, guardians, and production overlords.

Let’s start with the first. One of the CFO’s key responsibilities is to generate value and help the startup owners make wise calls.

In addition, they also design corporate strategies and plans of action. It is their job to ensure the business moves forward without getting tangled in a financial mess. They are corporate strategists.

Besides this, a good CFO also standardizes control processes and compliance practices in the business, so they act as guardians too. Lastly, they are also production overlords as they are the ones who automate business transaction processes and ensure the entity never bites more than it could chew.

Four Key CFO’s Responsibilities in a Startup

Viewing all the things a CFO does, it is just to say they are instrumental to long-term business success. However, to get a clearer picture of their role in a startup. Let’s explore the five key responsibilities of a good CFO:

1. Keep an Eye on Cash Flow

To make any brand or business a success, it is essential to get investments. You can’t build a business without funds. Sorry, ambition and passion are merely not enough.

Often, money scarcity is the biggest issue a startup owner face. They lack the ideal funds to catapult their business forward. Moreover, most startups run empty on their cash supplies because they fail to balance high operational costs and low revenues.

Perhaps that’s the reason why many startups fail to go past the honeymoon period. They go bust before the majority even know they ever existed. Among the many things a good CFO does, they also ensure that a business rides out financial storms.

They help the startup manage payable and expenses from day one, so all unnecessary spending is cut before they slash the rope on which the business hangs.

2. Provide Financial Guidance

The need to get investments doesn’t pacify quickly. You need more and more funds to take your business up and up. There are many finance options to get those funds, yet you can’t make the most of them without paying due diligence.

It is the role of a CFO in a startup to guide you through this process and help you secure funds. In a way, they ensure your business gets healthy investments and raises maximum capital. Simply put, a good CFO helps pursue your dream with more resources and better your odds of success.

3. Predict and Manage Failure

It is not all about success. No matter how exceptional you are, it is best to embrace there’s always a chance that you may fail. God forbid if that happens, a good CFO can help you ride failure and get back to winning ways.

Often, they even predict failure by evaluating numbers. They interpret data and tell you when to scale, what to do, what to avoid, and how to win.

4. Push Your Business to The Next Level

Besides giving you all-important foresight and predicting failure, a good CFO also tells you the perfect time to go up. Business is all about evolution, riding the curve, capitalizing on opportunities, and moving up.

However, if you do so by a hit-or-miss approach, no one would bet or invest in your business. With a good CFO on board, you can ascertain your action reaps profits and rewards. They help you push your business to the next level at the perfect time.

Do I Need to Hire a Full-Time CFO?

Knowing what a good CFO do in a startup, it is best to find the best one. But, the bitter truth is a CFO is an expert, and they charge loads of money. For many, it is simply impossible to hire a full-time CFO no matter how badly they want it.

Fortunately, it is not a must to hire full-time CFOs when you can get virtual experts at affordable rates. Through websites like Monily, you can outsource your finances to expert virtual CFOs that cost less, do more, and ensure your business win.

See Also: Virtual CFO Services – Why Your Business Needs Them

So, the answer is no! You don’t need to hire a full-time CFO. All you need is to stay vigilant and make the best use of available resources, especially the virtual ones.

Wajiha Danish

Wajiha Danish is the Director at Monily, overseeing financial strategies and operations for small and medium businesses. She has over 18 years of experience, including her role as Controller at HOCHTIEF PPP Solutions North America. Wajiha's background includes significant roles at Pakistan Petroleum Limited and A.F. Ferguson & Co. (PwC Pakistan). She is a Chartered Certified Accountant (ACCA) and Certified General Accountant (CGA) with expertise in financial management and project finance.