Start a great financial hygiene routine with virtual CFO services

Think about your personal hygiene. You brush your teeth daily, take regular showers, and tidy up your surroundings. If you wrote it all down on paper, it would look like a pretty complicated routine.

It’s a routine you keep up all the time so that you can maintain your personal well-being and create a positive impression on the people around you. You don’t put much thought into it, you just do it.

But have you ever considered the ‘hygiene’ of your business’s finances?

At Forecastr, we educate founders and executives all the time about the concept of financial hygiene. In a nutshell, it’s the practice of keeping your financial records clean, organized, and up-to-date.

Financial hygiene is a key component of your business’s health. It’s crucial for guiding your company to a successful future. One of the most essential aspects of financial hygiene is regularly updating your financial model

In this post, we’ll cover many reasons why keeping your financial model current is important, and discuss a few ways you can create a routine to make sure it’s always up-to-date. Whether you choose to do it yourself or use virtual CFO services, we’ll help you get started on the path toward impeccable financial hygiene.

Key takeaways:

• Financial hygiene is essential for business health: Regularly updating financial records and models keeps your business finances organized, accurate, and primed for strategic decision-making.
• Adapt your financial model as your business evolves : Just like personal routines, financial upkeep needs to adapt to business changes, allowing you to keep pace with growth and respond proactively to new challenges.
• Support strategic planning and stakeholder trust : A current financial model helps identify risks, recognize opportunities, and build credibility with investors, partners, and your team.
• Shift from survival to growth: Strong financial hygiene not only safeguards against risks but also empowers you to make data-driven decisions, helping you transition from simply surviving to actively thriving.

Table of contents

• Why should you care about financial hygiene?
• 5 ways financial hygiene can improve your business
• How virtual CFO services support strong financial hygiene
• Shifting your perspective from survive to thrive

Why should you care about financial hygiene?

Just like in the world of biology where a cell continuously adapts to its environment, a financial model needs to be alive, constantly adjusting and adapting to your business’s changing circumstances.

We’ll look at four reasons why financial hygiene is pivotal for startups and SMBs.

Keep pace with your business’s evolution

As your company progresses, its financial dynamics are constantly changing. Your customer base expands, revenues grow, expenses fluctuate, and investment prospects change. Your financial model must reflect these changes in a timely manner - as close to real time as possible.

Regularly updating your financial model allows you to maintain an accurate representation of your business, ensuring that your model continues to serve as a reliable tool for decision-making and strategic planning.

Recognize new opportunities and risks

Your business’s environment is never static. Market trends shift, competition intensifies, and regulatory changes can creep up at any time. Regularly updating your financial model can help you spot new opportunities, and identify potential threats, as they occur.

A forward-looking approach helps you navigate your startup with foresight and agility. Instead of reacting to changes that have already occurred, you can begin to take a proactive approach - actively looking for opportunities and positioning your business to capitalize on them.

Test and refine your assumptions

When you create a new financial model you include several assumptions about growth rates, pricing, costs, and other factors. All of these assumptions are educated guesses about what will happen in the future.

As you move forward and operate your business, the assumptions in your model should be validated and refined over time. Every time you update your model with your most recent accounting data, you can gauge whether or not your assumptions have proven accurate.

By comparing your projections against your actual results, you can test the validity of your assumptions and dial them in to more accurately reflect your real-world conditions.

Always be prepared for conversations with stakeholders

Whether you’re pitching to investors, negotiating with suppliers, or discussing plans with your board or your team - a current financial model keeps you prepared, informed, and effective.

Your model not only reinforces your understanding of your business’s finances but also helps you confidently and accurately answer your stakeholders’ questions.

At the end of the day, the importance of regular financial model updates extends far beyond just having current numbers. It plays a critical role in your understanding of your business’s health, growth strategies, and relations with investors and other stakeholders.

Your financial model isn’t a museum artifact you keep in a glass case. It’s more like a garden that needs regular tending to bear fruit. If you’re already doing this, that’s great! But if your model is neglected, you might consider getting some help, like virtual CFO services or a fractional CFO.

5 ways financial hygiene can improve your business

When we talk about financial hygiene, we’re not just talking about your account balances. It’s not that simple. It’s a holistic approach to financial management that encompasses accurate record-keeping, disciplined budgeting, strategic planning, and regular monitoring of financial health.

Let’s go a little deeper and look at five specific benefits you enjoy when you practice good financial hygiene.

#1: Improved visibility and control

Financial visibility is about always having clear, timely, and accurate information about your current financial situation. A robust financial model gives you a detailed breakdown of your current revenue, costs, cash flow, and other key metrics, along with a realistic forecast for each.

This means you can keep your finger on the pulse of your business. You always understand where you stand and where you’re headed. In turn, this gives you better control over your financial destiny, allowing you to make agile data-driven decisions and develop effective strategies for your business.

#2: Enhanced credibility with stakeholders

Transparency and reliability are key to building trust with all of your stakeholders including investors, customers, and team members. When your financial model is always up-to-date, you signal that you are diligent and responsible about your business’s financial management.

You come across as being exceptionally well-informed, invested, and proactive. The result is that you earn the respect and trust of your stakeholders. You’re better able to attract potential investors and retain your current investors in future funding rounds. Perhaps most importantly, you foster a culture of confidence among your team, your board, and your wider community.

#3: Flexibility in strategy and planning

When your model is up-to-date and your hygiene is on point, you’re never flying blind. You have a solid financial roadmap you can use to plot different scenarios - whether it’s expanding to new markets, launching new products, or planning ahead to respond to an economic downturn.

When you use your model for scenario analysis, you gain the ability to anticipate your likely outcomes and optimize your strategies accordingly. Taking a proactive approach to your financial future gives you a strategic edge in the marketplace through more insightful planning and data-driven decision-making.

#4: Streamlined budgeting and resource allocation

A solid financial model gives you a precise picture of your available financial resources. This helps develop an effective budget and avoid overspending.

If your model includes detailed data on unit economics across your various customer acquisition channels and product offerings, you can evaluate the efficiency of your operation across those channels and ensure that you’re allocating resources as efficiently as possible.

This can guide your decision-making on everything from hiring and marketing investments to product development and operational expenditures.

#5: Risk identification and mitigation

Financial risks can emerge from every direction - market volatility, operational inefficiencies, customer churn, regulatory changes - the list goes on. A current financial model lets you identify these risks early on and gives you a chance to develop mitigation strategies.

The bottom line is that good financial hygiene strengthens your business. It leads to credibility and trust, effective strategic planning, accurate budgeting, and proactive risk management.

Unfortunately, at many startups and SMBs, there is no clear owner for this critical process. If your business is too early to justify a full-time CFO, virtual CFO services are a great way to make sure that your financial model is always up-to-date. We’ll take a closer look at some of the most important benefits of virtual CFO services below.

How virtual CFO services support strong financial hygiene

In a small business environment, time is of the essence, and every minute counts. We understand that you’re probably juggling product development, marketing, customer relations, and much more. It’s easy for updating your financial model to slide off your list of priorities. But, as we explained above, the benefits of a strong financial model are too significant to ignore.

One common solution for startups and SMBs is to use virtual CFO services to fill this gap. CFO services are similar to hiring a fractional CFO, except instead of hiring an individual, you work with an online service provider.

When you use Forecastr’s virtual CFO services, we aim to serve as an extension of your team, adding financial expertise and great financial hygiene to your native skill set. Here’s how we do it:

Regular, reliable financial model updates

We strongly believe in proactive financial management. As part of our virtual CFO services, we provide regular updates to your financial model, making sure that it accurately reflects your business’s current state and future prospects.

Our team of experienced finance leaders is adept at capturing the dynamic nature of your unique business, from changing revenue patterns to fluctuating costs and evolving growth strategies.

The result is that you always have detailed and actionable data at your fingertips, without spending the hours required to update your accounting actuals and adjust your assumptions.

Timely financial health reports

We’re committed to providing transparent and detailed insights to help you understand and manage your financial health. Our comprehensive financial health reports offer an in-depth view of your key metrics and trends.

You can choose to receive reports on a monthly or quarterly basis. We keep the cadence that works best for you so that you get the right amount of information and advice to make informed decisions for your business.

Strategic insights and actionable advice

Numbers are the backbone of a financial model, but the true value lies in the nuanced insights it provides. Our virtual CFO services team doesn’t just update your model, we also help you interpret the data, understand its implications, and derive clear and actionable insights.

Whether you’re looking for growth opportunities, researching competitors, mitigating financial risks, or just trying to optimize your budget, we provide strategic advice to guide every aspect of your financial decision-making.

A dedicated finance leader for your startup

When you sign up for virtual CFO services, we assign a dedicated finance leader to work with you. This ensures that you have a consistent point of contact who thoroughly understands your business and can provide personalized advice to fit your unique circumstances.

Your dedicated finance leader is committed to supporting you through everyday challenges and special projects, as needed. You get a partner on your team who takes ownership of your financial model and your overall financial hygiene.

Adaptable support to meet your unique needs

Every small business’s journey is unique, and so are its financial needs. That’s why we offer flexible plans that can be tailored to suit your requirements. If you need strategic guidance on fundraising, we’re here to help. If you need a detailed analysis of your budget or resource allocation, we’ve got you covered.

We have a range of plans available to accommodate any level of involvement and support, and you can move between plans as needed. Our team is well-equipped to provide the support you need to successfully scale your business.

Shifting your perspective from survive to thrive

When you invest in good financial hygiene, your mindset quickly shifts from ‘survive’ to ‘thrive.’ As your data becomes more complete and reliable it provides a solid foundation for better decision-making, which translates into confidence and peace of mind for you personally.

Because you have realistic expectations about the future, you worry less about potential issues hiding around the corner. That mental energy can be redirected to proactively planning and optimizing your strategies to create better outcomes on shorter timelines.

Just like personal hygiene, financial hygiene is an essential routine that should always be near the top of your list of priorities. The benefits of practicing good financial hygiene compound over time. However, if you neglect it, the consequences set in quickly,

If you’re ready to make the change from survive to thrive, reach out today to learn more about Forecastr’s virtual CFO services and find the plan that works best for you.