Shared CFO Services And How It Can Take Away The Pain Points Of Any Start-up

Mr. Rajmohan Krishnan, Principal Founder and Managing Director, Entrust Family OfficeOne of the key functions of being an entrepreneur entails identifying a target market, building and optimising services, hiring the right talent, and achieving their goals. In addition to this, a critical, but often overlooked function of running a business, especially a start-up is that of managing finance, and its related operations. Even for a finance whiz, this can be challenging. Be it creating financial plans, managing day-to-day expenses, or creating plans for investors, these are some of the most crucial aspects of running a start-up, but often the most overlooked.

For this very reason, the role of a Chief Financial Officer is of prime importance for any start-up. On a strategic level, if one has closed a round of funding, has a significant amount of expensesand revenue to manage, the need for a CFO is heightened. His role is also important to manage block-and-tackle accounting, and bookkeeping. Despite this, one of the most common mistakes a start-up makes is not hiring a CFO, largely owing to the cost factor involved. To address this, the concept of a shared CFO has emerged, to enable start-ups to enjoy the services of a CFO, at a fraction of the cost. Furthermore, a shared CFO can also address some of the pressing tasks a start-up has to deal with, including accounting and business strategy, and financial modelling. As they typically work on a project basis, they are also equipped to handle tasks that the in-house staff is not equipped to handle, and leave them free to focus on core areas of the business. Here’s how a shared CFO can benefit a start-up.

Improvements in cash flow
One of the key functions of a start-up lies in monitoring cash flow, which is essential for both the founders as well as investors. A shared CFO understands this, and is crucial in assisting in analysing the business
data. A shared CFO can also understand revenue leakages, and create ways to streamline the cash flow, which is in accordance with the business goals.

Allows founders to focus on their core competency
A shared CFO can be roped in to forecast the future of the start-up, from a financial point of view. He provides strategic recommendations, and contributes to the growth of a start-up, by working towards the financial growth for the next few years. Additionally, the CFO also handles compliance and reporting, thereby increasing the founder’s bandwidth to focus on their core competencies.

Single point contact for ease of operations
Resource consolidation is an ideal way for a start-up to implement best practices. The same can be applied to the role of a shared CFO, who with his expertise, is in the best position to liaise with government agencies, vendors, investors, and bankers. By establishing a single point contact, start-ups are able to address financial issues with ease, resulting in smoother operations.

Identifies opportunities for cost cutting
Running a business tends to be an expensive affair. However, it is critical to limit expenses, if one’s business is to grow. A shared CFO helps by identifying areas where expenses can be cut out or reduced. It is particularly easier for a shared CFO to make these decisions as they are an external employee, and bring in objectivity to operations.

Growth strategy
Contrary to popular belief, it is not just the founder who is responsible for ensuring growth of a start-up. A shared CFO can provide value inputs for the same, through the right financial planning and strategy. Through the use of customer analysis, he is able to work out metrics on which to base the growth plan. Through this data analysis, it would be safe to say that the CFO is at the heart of business strategy. He is also able to engage with teams across the floor, to use his financial predictions to improve and implement best practises for increased growth.

Vast spectrum of industry experience
A shared CFO is one who belongs to a CFO company, or a team. Hence, through knowledge sharing by his team, he is able to gain insights into multiple industries, and apply this to the start-up he is overseeing. By employing the services of a shared CFO, a start-up can leverage his goodwill to not only gain valuable market insights, but also build contacts from across industries for mutual growth.

As seen, a shared CFO can address several of the challenges faced by start-ups. By employing their services, start-ups can now look forward to improved financial stability, and strategy. They have cemented their importance among the burgeoning start-up market in India, and we will definitely see their role grow in the years to come, making them a valuable investment for any fledgling business.

Entrust Family Office, a boutique investment advisory company, offers CFO services to start-up's, SME’s and Mid-size organisations.