13 July 2022

Today's Chief Financial Officer (CFO) does more than the standard accounting and business advisory tasks of saying no to projects due to budgetary constraints, overseeing the books, preparing financial reports, and helping to ensure statutory compliance. They are a strategic part of the C-suite, working alongside other executives to map out strategies for business growth.

They also play a critical role when your business needs to raise new capital by leveraging data and financial information to make a compelling business case to investors and lenders. 

However, CFOs are the preserve of a few businesses with the financial muscle to keep them on their payroll. But a Virtual CFO can get you the expertise of a regular CFO without coughing up as much money. They work on a contractual basis, allowing you the freedom to keep them only for as long as you need their services. 

Let's look at how a Virtual CFO comes in handy when capital raising and the four critical factors they consider. 

1. The value of your business

Unlike lenders who give you loans that you repay with interest, investors fund your business in exchange for part ownership of your business. Therefore, the value of your business helps them calculate how much ownership they'll get out of the deal according to the terms you agree upon. 

Your Virtual CFO may take several routes to arrive at a conclusive figure: analysing your business's management, its capital structure, future earnings prospects, or the market value of its assets. They'll also review your financial statements and prepare discounted future cash flow models. 

2. How much cash you need

A Virtual CFO can help determine how much cash your business needs and what you will spend it on. This requires doing the math and deciding what matters more, what can wait, and what will require more money. Ultimately, they develop a figure that covers what you need and the figure you'll quote to investors.

Beyond this, they make your story credible. A Virtual CFO prepares metrics and data that explain why a certain amount of money will go towards project A and not B and how the entire story makes financial sense. 

3. Investor pitch process

Say you've already found a suitable investor. Your Virtual CFO can step in to help make the pitch a success by incorporating the below in a business plan:

Sharing the fundamentals of the business

The CFO has to share clear facts about how your business generates revenue, what makes you stand out from competitors, and what market needs you meet. They'll also share the innovations and developments you have in store for the business' future.

Sharing financial projections

The typical investor wants to know where their money will go, how it will be spent, and how your vision translates into financial gain for them. A Virtual CFO can present the numbers and facts conservatively to help stop your vision from looking like a pipe dream. 

Explaining the risk involved in a reassuring way

Sure, there's risk in any investment decision, and investors understand this. Your CFO's job is not to tell investors there isn't any risk in investing in your business but to define what it looks like to avoid costly misunderstandings down the road. 

They also identify the potential shortcomings of the plan and how the organisation is addressing them. Then, they explain to investors what will happen in the worst-case scenario where the project's business goals are not met and what it means for them. 

Giving a realistic timeline

Sometimes, the timeline you set for the investment to churn tangible results takes longer than expected. Still, investors expect a reasonable business owner to communicate the milestones they've set, the dates for achieving them, and which plan may extend beyond the set period. 

Establishing credibility

The investor's returns are pegged on how much profit you make. To be sure that you're capable of profit, they'll need proof that your business has a reasonable history of making profits. Your CFO provides proof of profit by sharing historical records. 

In a nutshell, your CFO uses the pitch process to prove to investors that your business is worth investing in.  

4. Independent financial reports

Independent financial reports prove that your financial statements are fair and accurate, and your financial position, results of operations, and cashflows adhere to the financial reporting guidelines set in place by regulatory bodies. Business plans, valuations and audited accounts are all examples of independent financial reports a Virtual CFO can assist you with.

Independent financial reports are like a gold standard rating when looking for funds. They reassure investors and lenders that they're investing in a sound business underpinned by strong business fundamentals.

CFOs play an essential role in raising capital, providing leadership and structure to the process, and reassuring investors you are fiscally responsible. A strong CFO may cut back on the time it takes to raise capital, ensure the investors are a good fit, and negotiate the best price and terms for the equity.

Findex Virtual CFO services

As a business owner, one of your top priorities is to see growth to your bottom line. That means you have core accounting and business advisory and strategic needs that our Virtual CFO services can help with:

• Advice on raising capital 

• Help with business growth strategies and goals

• Preparation of business case and pitch

• Preparing financial statements and internal management reports 

• Financial planning, and three-way forecasting (profit & loss/ cashflow/ balance sheet) 

As an independent outsider looking into your business, a Virtual CFO can also serve as an objective sounding adviser for financial strategies and decisions. In addition you will have access to Findex’s wider suite of services including tax advisory, general insurance, managed payroll and wealth management.

Because we believe sound finances make a sound future for businesses, each of these services is geared to bring you the expertise of our world-class CFOs to help your business improve its viability – whether it's new or old - and help increase your revenue. 

Get complimentary sample financial reports designed to help you stay focused on performance and have visibility over the most important KPIs.

Sources:

[1] The CFO’s Role In An Equity Raise, Forbes, September 2020

[2] 5 Key Elements of a CFO’s Successful Investor Pitch, CFO.com, May 2021