Finance professionals are the unsung heroes of the startup world. In normal times, they can help founders raise bigger rounds, spot when to be more aggressive on CAC, and decide when to grow faster. With Covid-19 throwing the playbook out of the window, CFOs and Finance Directors at startups are more important than ever and could be the difference between life and death for startups.
If you are a finance leader, you probably know what we are talking about.
To help out, we decided to put together a list of seven tips that might come handy if you are a new startup CFO. We hope they are of good use to you and your team!
1. Cash is King
With a massive demand drop, some founders and CFOs are sweating to keep their businesses operational. How? If no money is entering the business, how can you keep a 50, 100, or 300 employee company running? The answer is simple: cash.
The only way of surviving the systemic shock is to have the cash to fill the gap. There is no other way. Whilst employees watch the meltdown from their dining rooms, finance teams should prepare for the next 12 months with the biggest stack of cash possible.
Liquidity is everything.
2. Renegotiate Deals
Now it’s the time to renegotiate deals.
Clocktower Technology Ventures believes that companies can expect to be able to save 20% on all of their contractual commitments. This means talking to your office provider, external contractors, any technology vendors, and agreeing on new costs and possibly new payment terms. Also, don’t forget to talk to your lenders, if you have them, as they might also be open to renegotiating your repayment conditions.
3. Cloud Software
According to Social Capital, the second largest expense venture-backed startups have after payroll is SaaS, hosting and advertising.
Getting the best price for software may represent a significant amount of extra cash at the end of the year. With Cledara, we estimate that you will save up to 30% on your software by purchasing it with our platform by helping you eliminate unwanted, forgotten and duplicate software subscriptions.
To save 30% on software, click here.
4. Track Risks, Spot Opportunities
First thing, take a look at your supply chain, upstream and downstream. Track any provider or distributor that might be having a rough time and could threaten your business.
If you spot something, take action by changing the provider, ensuring you have a backup plan, renegotiating your contract, or even consider, if you are in a strong position, the merits of acquiring the company.
Next, take a look at revenue and receivables. Do you have any concentration risk in either your customer base, or your aged debtors? What is the health of each? What is the impact of a customer having liquidity problems, churning unexpectedly or going out of business?
It’s not all bad news. With change comes opportunity and so it makes sense to keep an eye on new opportunities that arise. For example, contactless payments boomed in Asia after the SARS pandemic, which created the environment that made Alipay and WeChat the successes they are today. These opportunities are hard to spot in real-time, but if you do can be company-makers.
5. Key metrics
Be familiar with your business’ key metrics in as close to real-time as possible. It is important to keep an eye on the right indicators, track them, spot irregularities, and take action if necessary. Also, make sure they are available to your team on a platform.
Team communication is key!
Geckoboard is an interesting tool for dashboard sharing. It might be of interest to you!
Forget about your previous forecasts. You will need to re-purpose them.
A great common practice is to project outcomes for different scenarios: optimistic, standard, and pessimistic.
Also, consider making such forecasts for your cash flows, since cash it is probably your top priority as a CFO. It is paramount that you control your cash burn and your team knows what the targets are.
Fluidly is perhaps a cash forecasting tool you might want to consider. It uses AI to automatically generate cashflow forecasts for you in real time so that you can spend less time in spreadsheets and more time creating value for your business.
This was inspired by questions provided by people like you. We love receiving new and interesting questions that help us think about data in new ways. If you found this post interesting and have other questions that you’d like us to help answer, drop us a line at firstname.lastname@example.org.
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