4 Things a Part-Time CFO Can Do for a Business Startup

Editor's note: This piece was originally published in 2023 and has been updated to include additional resources.

Most startups don’t need a full-time chief financial officer. However, CFO-level expertise can help get new ventures off to a sound start and onto a path toward future growth.

A part-time CFO can help your fledgling business in four essential ways–stewardship, operations, strategy, and creating long-term business value.

Exactly what that means depends on your type of business. For example:

• A small construction company might need a part-time CFO to manage cash flow, develop accurate projections for project bids, or reduce project overhead.
• A small trucking and logistics company might need a part-time CFO to manage transportation spending, track operating expenses, identify available tax credits and incentives, or oversee an acquisition.

Positioning your company to grow right from the beginning allows you to sidestep common mistakes, take advantage of opportunities as they arise, and even set you on the right path to position the business for future acquisition/sale. A part-time CFO can explain what is needed practically and strategically to make your startup stronger.

Putting Basic Financial Building Blocks in Place 

Every startup should have:

• An accounting system appropriate for an early-stage enterprise–not necessarily the kind of broadscale system you will need in the future.
• The right internal controls. It’s never too early for risk management. Define who is responsible for approving payments, writing checks, etc. This adds efficiency and protects your business.
• Basic financial reporting, tailored to your type of business and the data you need right now. You can’t make effective business decisions without having key information at hand. Do you have a budget? Are you producing monthly financial statements? If you’re earning revenue, how is that recognized within your accounting system?
• Adoption of accrual accounting. Cash basis may seem easier, but it doesn’t give you a true picture of your financial position. An experienced part-time CFO can explain why this is so important and get you set up properly.

Company and Financial Risk Mitigation

Even startups face risks that require proactive protection, such as business insurance and health insurance for employees. Beyond that, there are other inherent risks. 

For example, client or vendor/purchasing contracts can become problematic, for various reasons:

• Big companies may try to force you to give them “most favored” or guaranteed pricing.
• They may demand exclusivity–either across the board or within your particular industry.
• Contracts may provide only one-way indemnification, not in your favor.
• They may include onerous liquidated damage clauses that require compensation far greater than any actual loss.

On the equity side, key person life insurance is vital. This provides protection in case stock needs to be transferred or if an owner or CEO dies and must be replaced. 

Do you have (or need) non-disclosure agreements? Do you have equity shareholders? If so, do you have buy-sell or other shareholder agreements? While these are legal issues, a part-time CFO can advise on thefinancial planning implications.

Do you have the right bank partner to support you in this early stage of business development? Have they given you a line of credit? Are they pressuring you to put up personal assets as collateral? A part-time CFO can help strengthen your banking arrangements.

Tax Positioning

Businesses want to minimize their tax burden. A part-time CFO can help you be set up correctly for tax purposes. That includes how your business is organized and ensuring tax deposits are made accurately and on time. 

An experienced CFO understands and considers taxation trends to shelter you from being negatively impacted. A common example for startups is the research and development tax credit.

Budgeting 

A CFO has the experience to help you create a budget appropriate for your type of business. They can also help you set up and document accounting and monthly closing processes and create a checklist to catch items from slipping through the cracks, even as your company grows or as personnel changes. 

Equally important for startups, they can help with cash flow forecasting.

A part-time CFO can help make sure everything is set up properly for your early-stage enterprise. They will provide the necessary tools for your business to function efficiently at its current stage. You won’t be overburdened with systems you don’t yet need, but you will be set to scale to the next level when the time comes.