A start-up technology/manufacturing company raised $10 million during its seed financing round. However, the CEO and Board were concerned that implementing the full staffing and development plan could cause the business to run out of cash before delivering on the strategic goals needed for the larger 8-figure Series A financing.
Engaging with a seasoned CFO from the Florida CFO Group helped guide big-picture strategic financial leadership decisions. To build confidence, visibility into the budgeting process was critical. The CFO Partner implemented a monthly budgeting process over a 2-year period with statements that included insights into profit and loss, balance sheet, and cash flow.
Budget analysis worksheets created in Microsoft Excel gave the CEO the ability to forecast and evaluate salaries and services, and CAPEX through hiring and salary decisions, including the timing of the hires. Worksheets were also created for revenue with collections, capital expenditures, related leasing cash flows, and for various other expenses.
These driving worksheets were linked to forecast financial statement worksheets using the same format as the actual monthly financial statements to make comparisons easy. The impact of changes on the driving worksheets was readily seen in the projected cash balance.
Each month, variances against the budget were reviewed by the CFO and CEO, some actions were taken, and the forecasts were updated.
The budget process analyses and strategic financial direction led by the CFO Partner offered the organization the visibility and insights it needed to build confidence in the next big decisions regarding timing and financing. The projections showed that the expected delivery of strategic goals would be complete with a buffer of 4 to 5 months before cash ran out. This buffer was sufficient timing for the next financing raise.
The CEO reported at the Board Meeting that the understanding of spending was continuing to improve and that there was no need to reduce spending below plan.