It is without a doubt that the COVID-19 pandemic has caused businesses across all sectors to struggle to stay afloat. To make matters worse, Singapore is currently heading towards the worst recession since its independence with the Department of Statistics reporting a total of 18,786 business closures from January until May 2020.
With significant uncertainty of how the pandemic situation will evolve as we approach the end of the year, many are worried that the worst is yet to come.
For startups and SMEs, the matter becomes more serious as they are fighting tooth and nail to maintain positive cash flow by shifting to online platforms, pivoting to other business models, or temporarily shutting down operations to conserve resources. However, with no end to the economic uncertainty in sight, startup and SME owners continue to face a daunting question: How do I make the best decision to ensure business continuity?
Very often, startup and SME owners envision goals and make decisions to ensure the long-term survivability of their businesses, leading to eventual exponential and sustainable growth. However, within the startup and SME ecosystem, a business owner often holds multiple leadership roles, including that of a Chief Executive Officer (CEO) and overseeing the company’s financial infrastructure.
Between envisioning the company’s long-term strategy, ensuring smooth day-to-day operations and struggling to maintain positive cash flow, CEOs tend to find themselves feeling increasingly stretched. For instance, two of my clients -Zhi Zhong, CEO of Geniebook and Janan, CEO of Gobbler- have reported finding their attention divided and unable to find enough time within the workday for matters that truly needed their attention.
A CFO will help to relieve some of their duties and the insight provided is valuable in ensuring the accuracy of the business’ financials and accounts. Most investors are still looking to back promising enterprises despite a cost-cutting period. Therefore, the support and guidance of a virtual CFO will be able to maximise a company’s value and establish a sound reporting system that is crucial when communicating and pitching to investors.
Also Read: Funding Societies appoints GoBear co-founder Frank Stevenaar as CFO, promotes Ishan Agrawal to CTO
The role of a CFO during fundraising
Before embarking on a fundraising journey, it is important for business owners to first determine the most sustainable funding avenue necessary to ensure long-term business continuity. To achieve this, business owners must stress test the key operational drivers of their respective enterprises, thus enabling them to plan for various scenarios.
The next step involves drawing up a roadmap specific to the business and determining the funding requirements needed to implement the plan. When it is finally time to decide on a funding method, business owners should keep an open mind while exploring all avenues of financing while not losing sight of the purpose of the fundraising.
With the leadership of a CFO, these processes become faster, easier and less daunting, enabling business owners to focus their attention and efforts on other aspects of their business like day-to-day operations or product development.
More than that, a CFO is able to strategically dive deep into a company’s processes, understand what drives value for the organisation and use this information to develop a strategic direction for the company. This makes them much more than a finance admin or bookkeepers.
With this in mind, tapping into the experience of a CFO during the pre-funding stage will allow business owners to gain long-term insight into their business needs and priorities. This will result in a more accurate understanding of funding requirements and business valuation in order for companies to experience only the most successful fundraising.
After funding is secured
Once funding is secured, business owners must look to implement proper finance management to ensure that the resources obtained are utilised wisely and effectively. The role of a CFO at this stage is to develop a scalable finance function to ensure that the company’s economic engine continues to run smoothly and efficiently with the newly acquired funds.
After leading a company through a successful fundraising round, an experienced CFO can also create robust financial models unique to the needs of the business while managing the organisation’s finance talent pool. Financial models serve as perfect budgeting tools.
Also Read: When should your startup get a CFO?
More than that, business owners should look to the guidance and experience of a virtual CFO in leading their finance teams while striving to implement best practices like annual budget planning within the company’s processes. Eventually, with financial models to drive sustainable budgeting year on year, I am confident that business owners will be able to experience long-term growth.
Growing trend for virtual CFO
However, not every organisation requires a full-time CFO. Even if you can afford one, the workload is not sufficient to justify one. To illustrate this, one of my clients -Eric of iVideoSmart- felt that employing a full-time CFO for a startup of their size was overkill.
At the same time, however, the accurate tracking of key financial metrics is a must. That’s where the services of a virtual CFO fits this need like a glove and companies such as Paloe, which provide this service have been instrumental in creating robust and effective financial models while maintaining active involvement in all financial matters.
Ultimately, while modern-day CFOs retain the traditional responsibilities of accounting, number-crunching and budgeting, I believe that the ever-changing world has resulted in CFOs evolving to meet dynamic business needs.
In turn, while many businesses are concerned with getting through this economic storm, it is a good time for business owners to hire an experienced CFO when it comes to making the right fundraising decisions or managing the firm’s cash flow.
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