The lead Finance role – from bookkeeper to CFO, what do you really need?

Part of our practice involves working with earlier stage companies, many of whom are late-stage VC-funded or PE-backed. At times there may not be perfect alignment between what a portfolio company founder and its “other equity ownership” expect from the lead finance position. At other times a non-financial founder is simply unsure about how to scope their finance leadership role. The differences between various finance leadership skill sets are important. So, too, is the timing of when one set of experiences and background are needed versus another. Identifying your needs in a timely manner can help to avoid more significant issues. In the end, it’s often just a question as to how the function needs to perform when placed in context with the company’s complexity and its stage of development.

The purpose of this note is to help establish a better understanding of the various levels of finance leadership…...

Beginning with a company in the early stages, here we may only need a strong bookkeeper or accounting manager, depending on our size and growth trajectory. A good accounting manager can maintain Accounts Payable and Accounts Receivable, manage payroll, do bank reconciliations and post revenues and expenses on a timely basis to create actual results. Typically, the founder understands their numbers well, she just needs to get accurate information and it’s not critical that it be super-fast.? The founder generally understands her results, can identify where sales can be improved or costs reduced, even catching obvious errors. She is likely running the business on a cash basis, so she typically has a handle on cash needs. Smaller size and less complexity remove the need for more financial firepower, the founder sees better ways to spend money such as in fostering growth.

Once the business becomes a little more complex it begins to move beyond the scope of the more basic accounting manager background. For example, multiple revenue streams, significant capital projects, expanding payroll or vendor lists may create the need for new processes and controls, potentially new systems. Whereas up to this point the founder reviewed every agreement, that load now needs to be shared. The business not only needs a controller who understands how to create and document better processes and controls, it also needs someone who can be trusted to approve basic vendor agreements. It also ideally benefits from having someone who can negotiate and improve standard agreements, offering suggestions on ways to reduce costs and improve profitability. Once a new controller is up and running, most founders find it was well worth the additional cost and time involved in onboarding.

There also comes a moment when the controller function alone can no longer satisfy the needs of a business. This occurs for many reasons, but complexity and, in its simplest form, the need for someone who can see through to the financial implications of various decisions becomes more evident. Some controllers can rise to the occasion, but many cannot. Whether due to their training or their nature, they are not able to support key decisions in the business as their experience is grounded only in providing structure and controls. The business now needs a “right hand” to the founder or CEO, someone who can walk beside them and help to evaluate the path ahead. This may involve helping to determine the path to take on financing, entering new lines of business, expanding organically or looking at acquisitions. It could just be the need to have another thought leader as a grounding point. These are the natural realm of a CFO, often beyond the scope of a controller.

This has been a very generic and intentionally brief look at the finance leadership role. At best it provides a framework to begin evaluating where your business stands in its stage of development and what it may need now from its finance leadership. If you elect to make a change then give yourself 3-6 months for a transition before you decide if the change was worthwhile. If you are contemplating a change then you should strongly consider using Frederick Fox (www.frederickfox.com ) as your recruiter. With former CFO’s and Big 4 partners on the team, in combination with a strong cadre of seasoned recruiters, we are uniquely well positioned to support you.

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The author is currently the Managing Partner at Frederick Fox, earlier in his career he was a CFO at 5 public companies and the audit committee chairman at another.