3 reasons why you should get a Virtual CFO

Starting a business requires cash and growing that same business needs even more. ? With?more?50% of Australian businesses exiting?within 4 years of commencement and?poor cash flow management given as a?key reason for these exits, the importance of?good cash flow management should never be?overlooked?(Australian Bureau of Statistics Counts of Australian Businesses, including Entries and Exits , Jun 2009 to Jun 2013 & Australian Securities and Investment Commission). ?

When poor cash flow management is combined?with the other factors that lead to business failure;?poor strategy and poor profitability, it becomes clear that many startups and growth businesses lack?the skills necessary realise their dreams.

Most?entrepreneurs would acknowledge the skills gap, the dilemma though is the the?thought of giving away control and the cost of giving that control away. ?This in turn leads the business to make do as a means to see them through. Initially, this may appear to be the best approach, ?maintaining it as the business grows becomes a strategic mistake. ?A mistake that causes burn-out among the team, a loss of founders due to a lack of salary, a lack of oversight where it matters and a rapidly disappearing cash balance.Put simply, focus swings from growth strategies to a daily battle of fighting?fires. ?All of this while the?business enters a black hole that swallows 50% of businesses in the first 4 years of their life.The reality, growth businesses and startups need a similar?level of expertise to large companies, ?just at a different scale. ?However, employing a great?executive team can be on onourous and expensive.This couldn't be further from the truth.Small and medium sized businesses can afford a great Chief Financial Officer (CFO) for example. ?This CFO is available on-demand or part-time, scales with businesses and costs less than hiring a full-time executive without an experience trade off. This CFO is a virtual CFO.Many business assume a bookkeeper or accountant can be hired instead of a CFO. ?These roles are great recorders of the past, whereas a virtual CFO is forward looking. ?A virtual CFO has experience working at the strategic level, has capital raising exposure and works alongside you as a trusted advisor. Virtual CFOs are experienced finance executives that can help steer your business in the right direction are not tax advisors.If a virtual CFO is not a tax advisor or another accountant, why should you hire a virtual CFO for your business?Starting and then scaling a business requires the right people, the right strategy, ability to execute the strategy and of course cash. ?If you are looking to grow your business to more than $2million and well above even $10 million then a virtual CFO is suitable for you. ?Here are 3 reasons why:

1. Improved cash flow

For any business, cash is the source of life, without cash the business simply dies. ?Sure you can raise cash through capital raising or bank loans, but a business that fails to generate its own, and has no ability to internally will not be attractive to investors or banks.

Businesses have 4 levers to pull when managing their cash flow, these four levers form the cash conversion cycle. ?Pulling these levers can have a dramatic impact on your cash flow. For example Strategies to improve your cash conversion may include reducing credit or introducing prepayments while at the same time extending payments to suppliers.

The skill is in when and how you pull these levers. ?A virtual CFO can help you model the impact each lever has on your business and then develop monitoring and reporting systems that keep you business generating cash for reinvestment or distribution to shareholders.

Afterall, unless you introduce capital that can dilute your ownership and control, your business can only grow as fast as the cash you generate.

2. Improved profitability

Accounting is more than a function that keeps the tax man from knocking on your door and the suppliers paid. ?Accounting is often one of the most important functions in a growing business' toolkit. ?However, many growing firms are let down by their accounting function. ? The team only is under resourced and stuck processing data with no capacity for valuable analysis.

Having a virtual CFO on your team will help you understand how to increase profitability from a break even 5% to a respectable 15% or even an enviable 20%, and how these profit margin impact on your ability to hire staff, pay market salaries and keep you out of the business black hole.

Your virtual CFO can show you how simple your numbers can be and how the efficiency of your team impacts on your profitability.

3. A scaleable executive team

A virtual CFO allows you to refocus the senior team on the activities that are going to grow your business. ?Often in a small business a senior team member is lumped with the sudo CFO role. ?This person, often without any formal experience is given responsibility and accountability for managing cash flow, maintaining profitability and advising the leadership team on how they should allocate capital. ?These important functions can make or break your business, they are lumped in with other activities and not given the attention they need.

Businesses in this position often miss key signs of failure and fail to realise their dreams.

A virtual CFO is a scaleable member of your executive team, meaning as your business scales so to can the amount of time the virtual CFO spends with your executive team. ?Giving you piece of mind that you have the skills on board to manage cash flow, maintain profitability, raise capital, scale your business and build a strong finance team that supports and adds value to your business.


CFOPartners is a specialist Australian?virtual CFO firm, providing experienced CFOs to startup and high growth businesses. ?Contact us?today to discover how we can help your business start, scale and achieve your goals.