Chief Financial Officer (CFO) - Roles and Responsibilities

Startups have become a household name, thanks to innovative young leaders of tomorrow.


With numerous startups reaching unicorn status, we are seeing a shift in the corporate landscape, where people are leaning towards working at a startup rather than a full-fledged established company.


But what makes startups so great?


One of the reasons could be the level of flexibility and ownership that comes with working in a startup.


Decision-making is a speedy process in the startup culture, but without the right leaders, even good decisions can fall flat on their faces.


That’s why it’s important to have a strong leader that can take difficult financial decisions – a startup CFO.

4 most important roles and responsibilities of every CFO's

Perhaps the most important asset in a startup is its capital.


And unless one of the co-founders has a strong financial background, the startup CFO responsibilities are to oversee the entire financial stack of the company (sometimes even build it from scratch), ensure financial legal compliance, and build the company’s portfolio for investor funding opportunities.


To enter a young company as the supreme finance manager, the startup CFO is usually the sole person responsible for the finance management of the entire company.


As you build a finance team, you slowly but surely delegate financial responsibilities to other employees. Still, the CFO responsibilities are never over.


The role of CFO is daunting, but it also comes with a lot of ownership and managerial opportunities. Let’s look at some of these duties:

Finance

This is an obvious one, but the startup CFO responsibilities are not one-dimensional.


The role of CFO oversees all the key components of the finance function such as financial planning, expense management, accounting, tax compliance, and financial reporting, to name a few.


As a young company, the startup CFO might outsource key tasks such as accounting and taxation, but as the finance team grows, these responsibilities can be carried out in-house.


The CFO will ascertain the complexity of tasks concerning the nature of the business at hand.


Additionally, if a startup deals internationally, then the startup CFO will look into global tax compliance codes to avoid any legal friction.

Legal

Following the Finance function, the startup CFO also directly deals with the Legal department, to avoid any risk and ensure compliance.


One of the main CFO responsibilities is an in-depth knowledge of the financial-legal laws and regulations of the country your startup is currently operating in, as well as foreign laws if applicable.


Not only this but a startup CFO is also expected to create employee compliance documents that are legally fact-checked.


Eventually, it is prudent to hire a lawyer that can assist you in creating airtight legal documents and overseeing compliance, but until your startup is in its nascent stage, the role of CFO and lawyer are synonymous.

Human resources

As the supreme finance manager, you are responsible for one of the biggest components in finance management payroll.


You are also charged with the responsibility of forming the finance department of the startup, which requires important managerial skills.


As the leader, the startup CFO is also a people person and will be expected to run their team smoothly.


From hiring to firing, you will be involved. So if you are keen on becoming the startup CFO, it might be a good time to brush up on your people skills!

Operations

In many young companies, the startup CFO will don multiple hats.


One of them might be that of the Chief Operating Officer (COO). Initially, your CFO responsibilities will include not only building the financial stack of the company but also supervising business operations as well.


You will be in charge of creating budgets for various operations and ensuring that it aligns with the overall finance management.


Not only that, but you might also be responsible for building sales and marketing stacks, departmental financial planning, and operations cost-benefit analysis.

How can a CFO make the startup succeed?

In the startup world, the CFO is not just a finance manager: he is also the COO, the Chartered Accountant, the Corporate Lawyer, and the HR Manager.


The startup CFO responsibilities are not limited to their function, but extend to and affect every part of the business.


Here’s how a startup CFO can be a leader and a team player in a successful young company:

1. Be a strong communicator

Being a startup CFO doesn’t mean you are just nifty with the numbers.


Your abilities as a leader lie in how effectively you can communicate information to your peers, employees, and investors.


The difference between a good CFO and a great one is how well you can break down complex financial information and convey it to people in the simplest way possible.

2. Stand out as a leader

“What makes a good leader?” is a question you’ll be asking yourself often as a startup CFO.


Your leadership abilities as a CFO are judged not based on how many academic and industry accolades you have received, but on how well you can inspire yourself and others around you to achieve company goals.


Your CFO responsibilities are not to work to your strengths, but to address your weaknesses and find talent that can complement yours well.

3. Fit within the company culture

As a C-suite executive that reflects the culture of the company, the startup CFO is instrumental in fostering a culture built in their image.


The role of CFO requires leading by example, and if what you desire from a finance team is a group of entrepreneurial employees bursting with creativity and innovative perspectives, then you need to instill that mindset through your actions and words.

4. Act as a true business partner

Your role demands you to be an active participant in all aspects of business, but it shouldn’t be limited to just you.


As startup CFO, you can impart a similar level of ownership and authority to your finance team, and keep business interests and goals above their own.


By encouraging and rewarding active participation, you are fulfilling your role as a business partner in a startup.

5. Aim for maximum impact

As a startup CFO, it is important to remind yourself that perfectionism isn’t in your job description, perseverance is.


Instead of expecting perfectionism out of yourself and others, aim for a job well done. In the dynamic world of finance, being scalable is more important than being perfect.


Therefore, encourage people to work smarter, not harder, and find areas of bigger growth that you can tap into and scale the business.

6. Show ability as an outward-facing CFO

Most startup CFOs are inward-facing: they are more comfortable with managing the internal finance of the business.


From accounting and taxation to audit and compliance, an inward-facing startup CFO is focused on the internal mechanics of finance management.


While these are important skills, it is also important to remember that one of the CFO responsibilities is to also be the face of the company, alongside the CEO and other C-suite executives.


CFOs who exude an outer-facing persona are more analytical and strategic when it comes to problem-solving and are therefore more appealing.

7. Provide a second opinion for the CEO

A company isn’t built by a group of yes-men who agree to the popular opinion and don’t offer any personal opinions.


It is the startup CFO’s job to act as a sounding board to the CEO’s ideas, and challenge and inspire them constantly.


Reminding the CEO of the company’s financial priorities whilst being reminded of your risk appetite is how company leaders make better decisions.

8. A confident risk manager

Speaking of risks, a startup CFO can set the tone of the risk appetite for the entire company.


As part of CFO responsibilities, you have to gauge the viability of risks present and be confident in your decisions.


It helps to stay transparent and define goals for every business department.


You can do so by allocating certain budgets to each opportunity and presenting a united front against risky avenues.


Related read - Guide to business budget - Types, importance and steps involved

9. Focus on opportunities more than risk

CFOs are usually wary of risks, and for good reason too.


But being a good finance manager is also about differentiating between risks and opportunities and striking while the iron is hot.


A successful startup CFO will always focus on opportunities and create value and growth for stakeholders, even if that means failure when certain opportunities don’t work out.

10. Significant high-level financial experience

An experienced CFO can bring about a new level of financial success to a startup.


Therefore it is wise to assess the experience that the person appointed in the role of CFO is bringing to the table.


If the person is newly promoted to the CFO position, then the company might miss out on the high-level financial experience needed to carry out the startup CFO responsibilities.


If the CFO is inexperienced, seek mentorship from an experienced CFO to bridge the gap in their skills.

11. Advanced modeling tools

CFOs can positively impact the company with the knowledge they bring.


While there are basic financial tools that are used by financial experts worldwide, a startup CFO has a lot more advanced modeling tools to offer.


Combined with years of experience and a unique perspective, a CFO can create scalable short-term, annual, and long-term financial forecasts for the company, along with in-depth analysis.

12. High-quality relationships

Networking is a valuable tool that a startup CFO can wield to the company’s advantage.


Every great CFO invests in high-quality and meaningful relationships with industry stalwarts and young leaders.


This can prove extremely fruitful for a startup during investment rounds, lending opportunities, enhancing vendor relationships, and more.

13. Well-rounded industry insights

It is not imperative to choose a CFO from your relevant industry, but it helps in terms of knowledge, experience, and networking.


Being well-versed in your industry can help the CFO manage their responsibilities better.


They can also impart additional insights into your industry and company processes to help them run more smoothly.

When should startups hire a CFO?

While having a CFO is great for a startup, the truth is that not every startup needs a CFO right away, nor can they afford one, especially in the nascent stage.


A startup CFO’s connections can also prove beneficial during fundraising season.


That being said, if you are a seed-stage startup preparing to raise money through Series A, a part-time startup CFO for three months would be your best bet.


Since funding requires a lot of preparation, not to mention communicating with investors and assessing your company’s finance management, a CFO can help you build the financial model, prepare reports, and leverage networking opportunities.


CFO workload post-fundraising is centered around sustaining the financial model proposed and tracking KPIs to ensure that all financial activities are aligned.


Post Series D, it is important to hire a full-time startup CFO to manage your growing financial department.


A full-time CFO can help you track the company’s financials along with your team’s KPIs and other performance metrics.


Being a startup CFO is being the leader of a company’s financial acumen.


As the CFO of a startup, it is up to you to ensure that the company is prioritizing correctly, allocating judiciously, and spending wisely.


The role of CFO in any startup is right at the helm, steering the ship; your leadership skill and mindset are what drive the company culture forward.


Being a CFO is an exciting growth opportunity that can prove to be successful for any young startup.

Streamline your startup's financial operation with Volopay