Startup founders wear many hats. They must build, they must recruit, and they must inspire. They need to test, confirm and pivot.
And they have to manage their finances.
When it comes to startup finances, things can get hairy fast. But when is the right time to hire a CFO, and is a full-time CFO still necessary in this C-level-as-a-service era?
I have worked with founders and CFOs for my entire career. The skill sets required for each job are completely different, but their complementary personalities can be just what drives a company forward. I also sought advice from some experienced financial institutions and CEOs on this crucial question.
Why do you need a CFO?
CFOs are responsible for managing cash flow, overseeing financial planning, and managing regulatory compliance. This ensures that the business has enough liquidity to support its operations and growth. They also play a vital role in financial planning, guiding the company’s strategic financial decisions and guaranteeing compliance with relevant regulations.
It’s common for founders to think closely about accounting when considering whether to hire a CFO.
It’s common for founders to think closely about accounting when considering whether to hire a CFO. Instead, they should think more broadly about the financial function. Sure, clean books and financial audits matter, but a true financial executive brings a lot more than just cleanliness on that front. An experienced financial manager is going to look at the business from the perspective of resource allocation and capital optimization.
For example, a good CFO will be able to plan and secure different types of capital (i.e., loans, leases, etc.) and align cost with return, keeping the company’s most liquid and expensive venture capital free for product development, team building and market expansion. This, in turn, will lead to an even greater ROI (return on investment).
Startup coach and CFO Evgeny Popov said that hiring a CFO was a no-brainer, similar to finding a CTO for your tech company.
“The CFO is a critical role for any business no matter how big, especially in the case of a tech startup aiming to scale,” he said. “Unfortunately, hiring a CFO is not an obvious move for founders because most founders come from the product or technology world and don’t see the CFO as critical to growth.”
