Being an entrepreneur is not an easy task as nine out of ten startups are less than three years old, a period that could be shortening if we consider the current pandemic scenario. But what is the main reason? As a rule, entrepreneurs are forced to close their companies because they did not plan their business model properly.

From the financial advisor UpBizor point out that it is extremely important for a startup to improve the management of cash flow in the early years of life, striving to predict ups and downs and preparing to build an efficient infrastructure.

The character of the CFO

“To achieve this, it is important to have a financial profile with logical thinking who can identify growth opportunities and manage income and expenses. A profile that controls the company’s activities in its finance area. What is known as the CFO,” explains Jordi AltimiraCEO of UpBizor.

CFO is the abbreviation for CFO, traditionally known as the CFO. This number is responsible for managing the company’s resources, identifying investment opportunities and finding ways that the company can use to save capital. In addition to finance, he also deals with cost accounting, financial mathematics, interpretation of results…

According to UpBizor, one of the most important issues today is getting the business strategy right in all areas and right from the start. Therefore, the role of the CFO is becoming more and more strategic. He helps organize the future growth of the company, develops the strategy and is heavily involved in the monetization plans.

In the right direction

It is therefore necessary to have a very strategic vision at the beginning of the company. The first step to be able to make a decision is to know and understand what needs and paths the company wants to take. Initially, the CFO will be hired once they are more established, but waiting too long can be a mistake.

Fast growing companies end up requiring more complex financial management than the junior finance team. By understanding the needs that will arise beforehand, companies can cover their risks and avoid compromising the company’s growth and survival.

Many professionals recommend having a CFO who can set up all the processes. Hand in hand with a CFO you can manage this better cash flow, since it is relatively easy for startups to have high costs and rather low revenues at the beginning and end up using up all the initial capital before they have established themselves on the market. CFOs manage these expenses, anticipate skyrocketing costs and help keep the company solvent in its early years.

On the other hand, a CFO prepares the company for so-called “ups” and “downs”. The short-term need for survival is often so great that company founders forget about long-term problems such as debt management or investment processes. The CFO develops and implements strategies to get through these phases, from the difficult ones to coping with very rapid growth.

In the direction of scalability

On the other hand, a CFO is crucial to building an efficient infrastructure. The CFO can create a scalable financial system to create strong foundations in various areas that will help the company to grow; in developing a data-driven strategy.

Financial data is a source of information that can give us insights into accounting costs, consumer behavior and much more. Thanks to the quick processing of this information, the CFO can be a good advisor for shaping the corporate strategy.

To seek funding, the role of the CFO is essential. This number will manage the financial plan in the necessary manner to attract investors and tie up public and bank resources, as well as help to spend the money properly so that the new capital has the maximum impact. Also keep in mind that a startup is temporary. The CFO acts as a long-term strategist to prepare them for three possible exits: the company matures, goes public, or is bought.

The best CFO for a startup?

Many startups cannot afford to hire a CFO. Nonetheless, hiring this number can be an efficient solution that offers value and experience, helps manage acceleration, matures and formalize operations, and adapts the business to the changes the business needs, among other things. A so-called external CFO was therefore created.

According to UpBizor experts, this figure corresponds to a person who negotiates with private investors, conducts income models, reporting, dashboard, internal control and manages public financing, banking operations while coordinating with the agency and with lawyers… And the startup will hire only the necessary hours, taking advantage of the economies of scale generated by the external finance director. Thus, the startup devotes itself to its main activity and the finances are left to the company dedicated to finances.