If anything, 2020 has proven that financial planning and having a roadmap are crucial to dodge unprecedented economic impacts.

And, as startups have to create the most of the money they have at their disposal, they need to be shrewd with the money.

According to various research conducted, around 60% of startups fail within the first three years. Although there are many different reasons why early-stage businesses tend to fold so readily, one of the most significant is the failure to find a profitable business model.

For a successful venture, financial planning is proving to be the key to long-term business stability. And to get on top of the finances, startups can do either of the two things- they can hire a full-time CFO, or they can hire a virtual CFO.

Firstly, What Is A CFO?

Essentially, the CFO (Chief Financial Officer) is the person responsible for managing your company’s finances, from bookkeeping and compliance to financial planning and corporate investments. While the role of the CFO used to revolve around basic financial reporting tasks, the modern CFO is expected to drive the success of their organization and use financial data to influence operational decision-making. As such, it’s a critical role that can have a major impact on your company’s culture and strategic development, for better or worse.

Now, What Is This CFO 2.0 or The Virtual CFO?

A virtual CFO Services (or CFO) is a service provider that handles all the duties of a traditional CFO while working part-time and on a remote basis. He/she can be a single person or an entity who does the same work which is done by a chief financial officer for a large enterprise.

Put simply, it’s like outsourcing the head of your finance department. Virtual CFOs are particularly beneficial for small businesses that may not have the funds necessary to hire a CFO full-time but would nevertheless benefit from having an experienced financial professional at the helm of their finance function.

Nowadays, many startups and corporates are outsourcing some of their operations to minimize the number of staff when possible. This led to an increase in the number of appointments for a virtual CFO rather than hiring an in-house full-time CFO.

Virtual CFOs can handle a range of finance-based tasks that many founders and business owners just haven’t developed the skills to deal with, such as creating budgets, highlighting trends in the market, acquiring capital, and drawing up financial forecasts. Now, virtual Chief Financial Officers are also expected to take on some of the more basic financial tasks such as bookkeeping, reconciliation, and so on.

CFO Vs vCFO

For a business, bringing in a CFO appears to be the most common move. But what would you do if hiring an experienced and knowledgeable CFO simply isn’t plausible for your startup? Additionally, hiring a CFO will cost a lot of money that a startup can spend on other aspects of the business.

It is where the increasingly popular “virtual CFO” role could be the difference-maker for your business. A virtual cfo services offers the same services as a CFO, but the only difference between the two is that a virtual CFO helps you out with your financial requirements via phone calls or video conferences and does not work full time.

Also, it is very beneficial for startups since they do not need to pay somebody for a full-time job when it is not needed.

The Advantages Of A Virtual Chief Financial Officer

There are many benefits associated with the virtual CFO role. Aside from the fact that this innovation can provide smaller companies with a level of experience that’s usually reserved for major corporations, virtual CFOs can help you in the following areas:

• Forecasting – Financial planning is a niche skill that requires a solid grasp of multiple accounting tools, as well as broad scope knowledge of financial documents like the cash flow statement, profit and loss account, etc. If you’re just starting, there’s a good chance that you don’t have anybody with these types of skills on your books, which is why a virtual CFO could be ideal. Financial forecasts play a major role in your ability to win investment and take the next step up the funding ladder.
• Spending – In the early stages, expenses can get out of control, so your business must have clear policies around expenses, purchase requisition, among other things. This way, you’ll have much greater insight and transparency into your incoming funds and outgoing costs. A vCFO can ensure that you have these processes in place, thereby empowering employees to make genuinely important purchases for your business.
• Processes – As you get bigger, your finances will become increasingly complex. From employees and vendors to clients and investors, there’s going to be a constant flux of money passing through your company, and without an expert to scale your processes, your business may not be able to handle it. For this sort of task, a bookkeeper or accountant won’t do, you’ll need a virtual CFO.

If you require virtual CFO Services for your startup, TheStartUpLab is the place for you. We provide CFO services for startups in India and have proven to be very trusted and highly advanced.

Additionally, if you are a budding entrepreneur and require assistance to register a Pvt Ltd Company, register a company, create financial projections, business development, compliance services, funding formalities, CFO Services, or other startup related legal services, contact us.

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