Your CFO is failing and might not even know it

How great leaders create value outside of their function

My specialty is helping startups navigate transformative change on the path from $10M to $100M in ARR. Over the course of this quarter, I’m exploring a question that’s been bugging me for years: Why aren’t we hiring leaders based on their ability to build teams of lieutenants?

In my last post I outlined the difference between single-function leaders who top out and cross-functional executives who act as catalysts for change.

Let’s dig into the role of CFO.

As a reminder, here’s what I shared last week:

Good CFOs are in full command of the company’s financials, managing against multiple scenarios and carefully balancing growth investment and risk.

Great CFOs understand that their job is not to hold others accountable with sticks and carrots but to enable everyone around them to hit goals.

I’ve had a front-row seat to more finance leadership transitions than any single startup will ever experience. Two thirds of them were “mutual.”

The story often goes something like this:

The CFO:

• Has been sounding the alarm about issue X for years

• Does not believe the company is adequately managing risk

• Focuses on creating scenarios and measuring teams against them

• Mostly talks about benchmarks and choosing which KPIs to track

Others around them:

• Do not think the CFO understands the business

• Acknowledge the risks, but are more focused on hitting the goals

• Question the importance of the financial metrics they’re being told to hit

• Have zero time to think about anything multi-year

The reality is that both sides are wrong: CFO is a thankless job with goal posts that always keep moving.

So, as a recovering finance professional myself, I often find myself defending CFOs to their bosses and peers. But, I also aim to give these CFOs direct and unvarnished feedback that they won’t hear anywhere else. The faults are mutual.

Let’s break it down across functional areas.

Accounting is like uptime: nobody cares until there’s a problem.

Accounting is the only function the CFO owns end-to-end. With due respects to all CPAs in the audience — accounting is boring.

Most companies adopt accounting processes and go through an audit because it’s a requirement as part of their fundraise — not because they see value in it. Most CEOs continue to think in terms of cash in / cash out until well past $100M in revenue. Most CFOs use “auditors will ask us about it” as the primary rationale to push more process on the company and slow business decisions.

There’s truth to that — 90% of accounting requirements are there for your investors to keep you honest and understand what’s real at a 30,000 foot level — and only 10% actually give you the insights needed to run the business better.

Today’s cover image is a portrait of Luca Pacioli whose 1494 book popularized double-entry book-keeping in Renaissance Italy. It’s all his fault.

Accounting-focused CFOs need to take a page out of their CTO’s playbook — and manage accounting the way you manage uptime:

1. Lay a solid foundation so you can fix future issues quickly when they arise

2. Don’t overthink it: stop wasting resources on dotting i’s that nobody’s tracking

3. Prioritize bottlenecks that slow down the business e.g. accounts receivable

4. Wait for things to break before you fix them (but do so reliably and sustainably)

DISCLAIMER: advice above only applies to pre-IPO companies. As you go public accounting becomes less like uptime and more like security. For public company CEOs and CFOs, the downside of bad accounting is jail time.

The problem here is that we’re all human.

To do accounting well you need to fully believe that all that process is not only necessary but valuable and business-critical. You need to have the person closing the books every month to overthink it and spot future issues.

That’s why the best CFOs know that they need a fantastic VP/Controller or, at minimum, a Director of Accounting backing them up. The job of the Controller is to worry about accounting process and accuracy so that the CFO doesn’t have to. The job of the CFO is to help prioritize how much process and risk the company takes on.

If you think it’s too early to have two layers of leadership in your finance org: think again. The time to start building it out is 18 months before you hit $50M in ARR.

To explore more broadly why middle managers are key to allowing leaders to scale, read The Magic of Middle Management: Pure Career Upside.

Stick around through next week to unpack the role of the CFO further:

How most CFOs think they own annual planning & budgets — but behave as if they don’t.

Why CFOs always have an opinion on go-to-market — are often right — but still can’t persuade anyone to listen.

What successful founders know about fundraising — but most CFOs struggle to understand.

PLUS: How to hire your CFO & the next layer of finance leadership.

In the meantime, feel free to explore more general leadership and recruiting principles or take a step back to think about the kind of company you want to build.

If this resonated, consider sharing the post with your finance team or schedule time to chat.