13 April 2022

Many startups in Australia fail due to financial mismanagement, according to a report by the University of Technology, Sydney. While there are many other reasons for the possible failures, it's notable that business owners often struggle to manage the financial side of their business.

That is where Virtual CFO services can come in.

A Chief Financial Officer (CFO) is a financial expert who oversees the entire financial activities of your organisation. A Virtual CFO provides all the same accounting and business advisory services of a traditional CFO but does the work remotely, either part-time or full-time.

When you hire Virtual CFO services, your business potentially enjoys better financial planning and cash flow tracking, which helps to minimise the chances of financial failures.

In this guide, we endeavour to answer the basic vital questions about the role of a Virtual CFO and how they can help your business with valuation and capital raising to fund growth. Keep reading.

How Virtual CFO services can help prepare your business for valuation

Business valuation is the process of determining the economic value of a business unit or the entire business. Business valuation applies in specific situations such as succession planning, when establishing partnership, ownership, or leading up to a company’s sale.

Business valuation is a necessary process that involves analysing the company's management, financial structure, capital structure and any other asset in the business.

If you are preparing for a business valuation process, Virtual CFO services can facilitate the process by helping in the following activities:

• Keep the financial information clean and tidy for easier review. Financial information needed for a valuation includes your financial performance and position. These details are mandatory if you use a performance-based valuation method.

• Work with the current business management team to help ensure the profit is high and reduce the operational expenses. If your business shows good performance at the time of valuation, the resale value will be high, and this is a significant financial advantage to you and your management team when negotiating.

• Gather the correct documents- other than the financial documents, there are other critical business documents required for a valuation such as details of physical assets, legal documents like insurance, business reports, sales reports and much more.

• Review current digital solutions to streamline your business processes. Having systems that can easily be picked up by new management make the business more attractive and will be beneficial to the overall sale package.

How Virtual CFO services can help your businesses raise capital

A business looking forward to raising more capital is most likely looking for investors. Investors are very keen on choosing the right business to invest in, so their money does not get lost. Virtual CFO services come in handy when businesses are planning to raise more capital in the following ways:

Reviewing financial records

Investors need transparency. So, any inaccurate information in your financial records can be a turnoff. Virtual CFOs examine the current financial books to ensure they are tidy and accurate. With the help of a CFO, your books will be in better shape to present correct and accurate information.

Assist your in-house team

A Virtual CFO can help your in-house team implement streamlined processes and gain access to valuable data. The easier the data is to access, the more confidence an investor will have as this shows that your business is running smoothly. It also shows that the team are being utilised to their maximum potential.

Most importantly, a Virtual CFO can provide an independent review of what your in-house team is doing to ensure everything is above board.

Reporting to help raise capital

When investors are looking to invest in a business, they need accurate and comprehensive reports that give them comfort they are making sound investment decisions.

Virtual CFO services can give your business access to the latest reporting tools and help ensure you have all your ducks in a row when it comes to compliance and tax reporting. Here’s just a few of the ways Virtual CFO services can help you put your best foot forward.

• Regular reporting on business performance to provide investors with follow-up reporting to know if the business is performing after making their investments. A Virtual CFO can help in the periodic reporting to keep your investors informed and in the loop.

• Tax and legal compliance to help ensure your business is tax compliant. Investors consider your tax records when deciding to invest in your business or not. A Virtual CFO has expertise in tax management and tax reporting.

• Budgeting and controlling to create timely budgets for your business. A reasonable budget controls the financial spending and helps to ensure the operational expenses do not overweigh the profits. Virtual CFO services include variance analysis, cash flow, budgets and much more.

• Non-Financial Metrics to keep investors informed of the whole picture. Key performance indicators that should be included in regular reporting include health and safety, customer satisfaction, employee retention, contract and customer metrics.

Using Virtual CFO services to prepare for the pitch

Virtual CFO services can help you get investors and partners as well. A Virtual CFO first understands your needs, the size of your business and the type of business partners you are looking for. They then use that information, together with their skills and extensive network, to connect you to the best partners.

CFOs know how to write different pitches to partners. So, if you are looking for a potential business partner and don't know how to deal with the process, a Virtual CFO could be your ideal starting point. Just ensure that the expert is well experienced and has a strong track record of streamlining the entire process of seeking a business partner(s).

Final thoughts

Business growth is a common goal for most businesses. If you run a small or midsize business and have plans to expand it, you will need to maintain timely and accurate financial records.

If your in-house team doesn’t have the seniority or depth of experience you need to pursue your expansion goals, outsourced Virtual CFO services could be the solution you’ve been searching for. The right Virtual CFO partner can help ensure your financial records and processes are in order and you have the right reports to help you attract the right investors.

Download our comprehensive range of sample financial reports to help individuals, business owners and CFOs to simply visualise data with easy-to-follow reports.