Entering the world of entrepreneurship presents myriad challenges, and it can be challenging for founders to navigate the unexpected questions that come up when forming a business. Today we’re examining three of the questions we receive most often, along with answers that can help you on your entrepreneurial journey.
What advice would you have for a startup that’s too busy for financial reporting?
Even the smallest new businesses don’t have the option of ignoring financial reporting, because it’s typically a legal requirement. But even beyond the reports you must maintain to ensure compliance, financial reporting also gives you a big-picture view of your company’s finances. Having a clear visualization of your revenues, profits, expenses, cash flow, capital, debts and other benchmarks allows you to make projections for the future of your business, such as knowing when you’ll be profitable, your cash runway, your valuation and more.
In addition, anyone who is considering investing in your business or loaning you money will want to see the financial standing of where you are at any given time. Maintaining accurate financial reports will allow you to show them exactly where your finances are and what the projections are for the business’ future.
Many entrepreneurs believe they don’t have time to invest in financial reporting, but if this is the situation for you, you should either invest in software that will allow you to automate part of the process or you should outsource your financial reporting to another entity.
What is employers’ liability insurance and how do I know if I need it?
This is one type of insurance that you may not already have in your toolkit, because in the US, it’s not typically required like workers’ compensation is in many jurisdictions. But employers’ liability insurance can be very helpful for small businesses by preventing them from facing financial losses.
Here’s how it works:
Suppose an employee at your business is injured on the job. That staff member will get their medical bills and some lost wages covered by your company’s workers’ comp policy. But employees may believe that since they were injured on the job, your company is at fault for more than just lost wages and medical bills, and they may choose to sue you. That’s where employer’s liability insurance comes in. It can pay for your legal expenses so you can continue operating in the face of negligence lawsuits.
Insurers may refer to this type of insurance as “Part Two” of a workers’ compensation policy, because it provides a more full coverage benefit beyond what’s typical in a standard workers’ compensation policy. If you think you might need this type of policy, talk to your business’ insurance agent, a direct insurance broker or a consulting firm that can advise you on the best insurance package for your business. Keep in mind that in some states, you must consult the state-run organization that oversees the business insurance for that region to get employers’ liability insurance.
What are outsourced CFO services?
If you hired an in-house chief financial officer, that person would run the entire finance department of your company, checking your numbers all the time to determine what your financial future would look like, where you should focus to make the biggest financial impact, and what your cash runway looks like. An outsourced CFO does exactly that, but without being an employee of your company. Instead, you have them on retainer so you can tap their expertise on an as-needed basis and check in with them as frequently as you need to.
This is often the best solution when you are either not big enough to hire a full-time CFO or you just don’t have the need for one. An outsourced CFO is able to handle those responsibilities for you using the allotted time/budget that you have. The data that an outsourced CFO reviews can help you drive growth and efficiency at your firm, while saving you the cost of hiring a full-time CFO.
