What are the types of internal audits?

Internal audits can include operational audits, compliance audits, financial audits, forensic audits, IT audits, and environmental audits.

What are the key standards in internal audits?

The key standards include independence, objectivity, proficiency, quality assurance, and communication.

What is the risk-based approach in internal audits?

The risk-based approach prioritizes auditing high-risk areas within an organization to focus resources where they are needed most.

What are the 5 C's of internal audit?

The 5 C's are Control, Compliance, Cost, Consistency, and Communication, which are critical for a successful audit process.

How does an internal audit help in risk management?

Internal audits help identify and mitigate risks by ensuring that internal controls are effective and that the company complies with laws and regulations.

Need and Importance of virtual CFO Services for Startups in India

Published on May 24, 2022

Startups need to get a lot of things done which is why it is said that entrepreneurship is not for the faint-hearted. Managing their finances is one of the most challenging tasks for any startup. But like every task, this can also be outsourced or delegated to someone.

A CFO or a Chief Financial Officer is what we are talking about here. Immersed in all the operations of the business from sales to marketing, engineering, product development, etc., a CFO makes many tactical and strategic decisions, like:

How worth is developing the project?
Will the product be profitable?
How quickly, any investment will pay off?
Which line of business is profitable and should be developed?
Monitors company funds and ensures they are spent only where necessary.
Balancing the risk by analyzing the desire and the possibilities of a project.
And most important, fostering financial culture and literacy in the company.

Though there are many other things a CFO does, these are some to understand how important they are to the company.

Apart from this, a CFO helps build confidence among investors. Having a multi-disciplinary, experienced and talented CFO becomes crucial for startups seeking funding. Today, we will talk about how a CFO can shape a startup but before that let’s look at the various types of CFOs.

Types of CFOs that you can hire

Virtual CFO: This is the best option for any startup or small business that cannot afford to hire a full-time CFO. They offer the same services with the only difference that they are not physically present in the office and manage your business needs virtually. They are relatively less expensive than hiring a full-time CFO.

Outsourced CFO: They work on the basis of a contract. They offer CFO guidance on a project basis or part-time.

Part-time CFO: They work part-time with you and are charged based on working hours

Interim CFO: As the name suggests, they temporarily join you to manage your business’s CFO roles.

Even though every CFO type works in bringing positive changes in the company, a virtual CFO
is the most suited option for a business. This is because as a business, you don’t have to hire somebody full-time, which is costly and you get the best services in terms of experience and output.

Need for a virtual CFO

A virtual CFO ensures that your startup is well-oiled and prepared to face future challenges. CFO helps you to:

Control outstanding debts and bad-debts
Litigation free contracts
VC attracting unit margins
Management of vendors and suppliers
Compensating director and reporting
Compliance with tax rules
The decision to lease or buy
Draft well-structured employee agreements
Ensuring to attract the best talent through employee stock options and other tactics

The most prominent reasons to have a virtual CFO are listed below

Cashflow management

CFO’s come with years of experience to save you from running out of money. To ensure that your startup does not falls prey to poor cash flow management, a CFO takes charge of trimming unnecessary expenses, rearranging financial structures, and bringing order to the chaotic financial unit.

A CFO also ensures that you are well-prepared for market changes and financial crises.

This brings me to the next point

Preparing your startup for ups and downs

In a startup’s journey, tackling short-term problems becomes so intense that long-term issues often take a back seat. A CFO looks ahead and develops strategies for rough financial patches of business. He/she can offer valuable knowledge towards improving your operations from the experience they have, having seen a business fail or survive.

Goal evaluation

Business runs on goals and targets and in order to meet those targets in the fixed timeframe, you need monthly financial reports to keep track, cashflow statements and balance sheets. A CFO helps in preparing these reports, analyzes them and helps you to achieve your financial goals.

Data-driven insights

The financial data collected through balance sheets, cash flow statements and other accounting books, is used by the CFO to develop crisp business strategies using data analytics. CFO uses the data to generate data-driven insights for your startup.

Building efficient infrastructure

CFO helps your startup build a strong foundation. Overseeing the financial system scalability and preparing you to upscale and downscale, CFO ensures that your finances are in place to meet any unprecedented events.

Funding or next stage planning

A startup is likely to need funding or needs to plan for the next stage of business. A CFO manages the financial planning and due diligence required for the investors to trust your startup with their money.

When you plan to expand substantially and cross the stage of being called a startup, you either go for IPO or get bought. Here, a virtual CFO helps you plan your long term strategies for a smooth transition. He/she helps you prepare flexible strategies for hiring and other operations.

Startups often underestimate the role a CFO plays in establishing and stabilizing the business. As a general perception, CFO is considered a large corporation requirement and not for startups. However, having a CFO at the early stage of your startup brings a lot of positive changes and strategies. CFO brings the finances in shape by taking into account the problems that may arise or the external factors that might affect your startup.

If you want to save yourself the pain of running out of money, spending more than necessary, not planning for scaling and other losses caused due to lack of strategy, get a CFO for your business. It need not be a permanent CFO, you can hire a virtual CFO as well to reduce your cost and yet gain from the expertise. This is where Felix advisory helps you. Our virtual CFO services are tuned to your startup’s needs and ensure only the best business advice through our team’s years of experience.