At Danoy, our specialty is providing external financial management for startups. As part of our service, we integrate into the startup as an external finance department, providing all necessary financial services: accounting, payroll, financial management, and of course, an external CFO from our team who becomes a member of the startup’s management and is responsible for all financial management and broad financial processes.
How exactly does financial management for startups differ from similar services needed by other companies that are not classified as startups? Let’s find out.
Focus on Growth: Accounting for Startups
The term “startup” refers to new companies that are still building themselves, often with a technological or innovative nature. Therefore, accounting for startups requires a very specific perspective. Of course, it needs to be accurate and efficient like the accounting of any company, but it needs something more… and we believe that accounting for startups should have an orientation that focuses on specific areas that help the company, including financial processes that assist the company in growing in a healthy and stable way.
For example, one of the most important emphases we place on accounting for startups is a high awareness of cash flow. By their very nature, startups operate within a limited budget. Even if there have been recent funding rounds, in many cases the company is still not profitable, so it is crucial to manage cash flow with a measured burn rate that allows proper operations until the next funding round or the start of sales.
To achieve this goal, financial management for startups must be very calculated. Therefore, one of the first things our external CFO will do when starting work is to create a detailed financial strategy for the startup. This financial strategy will reflect the current financial state of the company to the startup’s management, detail costs versus expenses in very high resolution, and include recommendations for actions that will reduce costs while maximizing profits.
Financial management for startups must also understand international tax laws and know how to manage companies registered abroad, especially in the United States and Europe. Many startups have some connection to foreign markets, such as being registered abroad or marketing to an international audience. To operate correctly abroad, and to also create tax benefits for the company where possible, financial management in a startup must be done with an understanding and familiarity of working with foreign authorities, knowing the relevant forms for operations, reporting regulations, tax payment processes, and more.
In addition to all of this, it is important to remember that a startup is a growing organization with a fast pace of change. Therefore, from time to time, financial management in a startup will require dealing with events such as new investments, its sale, a merger, or even an IPO. All of these are significant financial events. Financial management in a startup requires knowing how to handle these financial processes, including passing due diligence, advising the management, and dealing with any special financial event when it occurs.
Building the Organization Together: Financial Management for Startups with Danoy
As can be seen, financial management for startups is a highly focused and unique field. It requires precision, but also versatility.
As one of the leading companies in Israel in the field of financial services for businesses, we have accumulated extensive experience in managing finances for startups. Among our clients are startups operating both locally and internationally, from various industries at different funding stages, including some we have helped lead to a successful exit. If you are looking for financial management for your startup that will help your company grow—contact us.