At some point, every growing startup finds it needs professional financial guidance if it wants to survive. After all, founding a new company is risky: it’s been estimated that three out of four venture-backed startups fail. But if you’re not ready to hire a full-time chief financial officer (CFO), it might make sense to explore outsourcing the CFO function.
If you go this route, an important factor in selecting a contract finance professional is the accounting technology they use with clients. Here’s why you should evaluate not only their qualifications but their tech stack as well.
The role of outsourced CFOs as business enablers
Once viewed as simply a numbers cruncher, today’s CFOs oversee a range of critical and complex responsibilities. They help forecast the company’s future, monitor burn rate, pinpoint fundraising opportunities, and more. They also offer operational guidance, ensure that effective compliance, accounting, and treasury processes and policies are in place, and provide financial clarity that informs good decisions. Put simply, today’s CFOs are more than accounting professionals: They're forward-looking leaders who can advance your company to new levels of success. A good CFO becomes a trusted business advisor, and not surprisingly, such a person is in high demand.
Outsourced (sometimes called "interim") CFOs usually work full-time positions under contract with set start and end dates for their engagements. These finance professionals will have full control over your back-office functions as well as providing guidance and industry expertise. They’ll lay the foundations for your business’s growth, and you’ll reap the benefits long after the contract ends.
If you’re interested in going the outsourcing route, companies like airCFO provide startups with back-office accounting services such as bookkeeping as well as CFO-level finance services such as financial modeling, analysis, and budget creation. Outsourcing these services can give you financial peace of mind without a hefty back-office investment.
Another option is bringing on a part-time CFO as an employee who will be with you for the long-haul, allowing you to develop a strong relationship. The advantage of a part-time CFO is that they become deeply familiar with your business’s financial trends and can report on your company’s growth over the first few years.
For the purposes of this blog post, we’ll focus on the role that technology plays in an outsourced CFO function.
How technology affects the CFO role
Technology enables and influences every decision a CFO makes. To help your startup grow, your CFO—whether outsourced or an employee—must have a strong understanding of the latest financial technology and how it can give them access to the timely, accurate data they need to glean insights and make decisions about the future.
Financial reporting, audit, compliance, budgeting, and treasury functions require CFOs equipped with the right tools and skill sets to deliver the right information at the right time. As one writer in Forbes put it, “In addition to traditional finance skills, CFOs now need to layer on the skills of a data scientist.”
An experienced, tech-savvy CFO can also help you build a flexible and scalable back office with financial systems and controls that support rapid growth while ensuring that you’re following GAAP accounting principles.
Whether you bring in an outsourced CFO or hire someone part-time, the accounting technology they use will affect how smoothly they can help you operate and scale. Select partners who use or have expertise in best-in-class software and proven processes that streamline accounting, bill payment, and revenue recognition. Look for CFOs whose tools can provide you with capabilities such as:
- Regular monthly financial statements delivered online
- Clear, concise investor and board reporting
- On-time vendor payments, accurate payroll, and payroll taxes
- Accurate revenue recognition, including accounts receivable reporting
- Tax preparation and tax-related compliance, filings, and advisory services.
These tools should help your company deliver on targets while lowering operational costs.
Streamlining payables and receivables
Many startup founders quickly find themselves overwhelmed by the sheer amount of financial data their business generates. They may struggle to keep up with the accounting and bookkeeping side of their operations, which requires detailed monitoring of payroll, financial transactions, operating expenses, accounts payable, and accounts receivable.
The days of being able to rely on memory or a journal to track financial information such as bills and receipts are long gone. Even Excel has its limitations. Startup founders absolutely must look to the world of technology for more reliable solutions.
A good example of the role that technology plays is airCFO, which provides cloud-based accounting, finance and tax services to many U.S. startups. The airCFO accounting team relies on best-in-class accounting software and proven processes to keep clients in the loop with reporting and communication around cash management, revenue and expenses, and monthly financial statements.
For example, airCFO uses Routable to help clients streamline their accounts payable processes—critical for growing businesses looking to scale. airCFO leverages the Routable API to integrate accounting functions with startup clients’ existing accounting software and other systems. Routable ensures a two-way sync with QuickBooks Online, reducing time spent on data entry and eliminating hidden sunk costs. airCFO team members don’t have to enter bills or invoices manually into QuickBooks Online, or match them to bank transactions.
By using Routable’s secure platform and automated workflow, airCFO also helps clients reduce compliance costs and risks. Routable’s fine-grained access permissions allow airCFO and its clients define who can access data. Clients can also customize their approval workflows to further ensure compliance with policies.
Great customer support
If you’re considering outsourcing critical finance functions, make sure that the partner you choose not only uses a great accounting technology program, but also has great customer support to back it up. Look for partners who keep documentation up to date and who are continuously improving their technology with innovations.