Why CFOs are Becoming the Go-To Metric for Start-Ups & SMEs

By - CA Jitendra Jain, Director, Tapanshi Finanziell Pvt Ltd

Given the pace at which market dynamics, corporate strategies, and operational structures have evolved in recent years, businesses are increasingly becoming aware of the critical role that CFOs play in determining and directing a company's strategic direction. CFOs bring incredibly useful networks in addition to their talents and expertise, whicht can help with business growth, legal compliance, and hiring.

Also, since technology is altering how the workforce operates, it stands true for CFOs as well. Technology is driving the conventional position of a CFO and making them more digitized. They are particularly experiencing a change in how they conduct their businesses due to technology and the automation of routine transactional work. Technology advancement is making CFOs more and more interested in the long-term advantages of digital investments, which can significantly lower the cost of conducting business. Using it, they can cater better to today's consumer-driven environment and keep businesses competitive in the market.

Jitendra Jain

Post-covid several startups and SMEs are still navigating through extremely treacherous waters. CFOs can promote their recovery and confront ongoing uncertainties, given their distinct position to plan out the most effective routes to success, see the wider picture, and comprehend the inner workings of our organizations.

However, the majority of startups and SMEs lack the need for and the financial resources to hire a full-time, competent CFO.

A fractional approach can assist them in this situation by allowing them to hire a CFO just as needed, eliminating the burden of hiring one and providing executive counsel and better knowledge to help with financial planning and decision-making.

CFOs - Go-to metric for startups and SMEs

A CFO's agenda now includes a considerable discussion of enterprise risk where legal reporting and payment requirements are constantly developing and altering. CFOs have long been recognized for their influence on the financial side of the business, but their impact on several other key sectors has also become important these days. These sectors include raising capital, establishing reporting mechanisms, developing a corporate strategy, ensuring balanced investment growth, and reserving money for potential opportunities. By having a capable CFO on their side, no matter if outsourced, startups and SMEs can achieve considerably. Startups and SMEs can derive the following benefits by employing CFOs.

Strategic Decision-making

Because the future is uncertain due to growing political and economic unpredictability that has a distinctive impact on business, CFOs are expected to look around every corner and make more strategic, deliberate judgments. Today, the expansion of the company's finances, as well as long-term financial and non-financial initiatives, depend heavily on the work of the CFO.

The CFO assists in making strategic financial and business decisions that are optimal for the organization and its objectives. They provide accurate reporting and meaningful data related to inventories, spending, recruiting, capital investments, and other matters. They guarantee on-time delivery of accurate, high-quality information, establish and track KPIs, develop strategic plans for success, deal with setbacks, and support contingency planning. Recovery calls for contingency planning for both, startups and SMEs to get through the current challenges.
This is where CFOs come into play.

Sustainability Measures

A growing concern for both large and small firms, sustainability challenges, can be addressed largely with their help. They can assist in balancing short-term concerns with longer-term goals by integrating sustainability challenges into reporting with conventional financial indicators.

Easy Funding

They help startups and SMEs with their funding challenges. Their maintenance and development of beneficial networks with banks, accounting firms, brokers of liability insurance, and other similar organizations facilitate safe financing.

Cash Flow Management

CFOs actively control the fragile cash flow of startups and SMEs as opposed to only monitoring it because they understand that cash is vital for every business. They examine the total cash flow and offer suggestions on best practices that have been proven effective for firms of comparable size and stage of development in an industry vertical. They also suggest technologies that help business owners keep an eye on their cash flow and better prepare for unforeseen circumstances every day.

Growth Assistance

A CFO can give a company a blueprint for future growth if they have the required advanced analytical knowledge. This entails increasing profitability as well as carefully planning when to hire new employees, make acquisitions, and other investments, such as in real estate or a marketing campaign. Also, the CFO will always ensure that all financial accounts are accurate and defend the company in the case of an audit. They can deliberate on best accounting practices and offer guidance to guarantee long-term success.

Resource Optimization

Internal controls, including procedures, processes, and automation, can be put in place with the support of CFOs to help prevent errors and even fraud. This lowers the possibility of expensive financial errors. Additionally, CFO services ought to free up the business owner to concentrate on their core competencies rather than accounting, lowering overall risk by giving the finances more focused attention. They can assist entrepreneurs in deciding where and when to make investments and accountants in tax preparation.

The many benefits of hiring CFOs have led to the popularity of virtual CFOs and outsourcing them. Besides, such hiring allows to employ a CFO more relevant to a particular industry. Employing someone more suited to the industry sector through outsourcing helps SMEs and startups gain the necessary skills, experience, and competitive edge.

Conclusion

Startups and SMEs can gain from hiring a CFO sooner rather than later since they need to get their systems in place, especially around governance and compliance. All of the aforementioned strategic services, offered on a part-time or as-needed basis by an outsourced CFO, enable startups and small businesses to obtain financial counsel of an enterprise-level quality that may also be more suited to their current requirements and issues than a full-time worker. The demand for CFOs is therefore increasing as they play a considerably more significant role than just figuring out and putting financial rules in place. The lifeblood of every firm is money, and it requires a skilled CFO to understand exactly where that fuel originates from and how decisions made in the future will impact it, making them a vital resource for businesses.

(The author of the article is CA Jitendra Jain, Director, TapanshiFinanziell Pvt Ltd)

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