Being a chief financial officer for a startup company is always challenging. A startup CFO is hands-on. He has to perform accounting tasks that in large companies he would delegate to staff members. Before the company obtains funding, he may have to work for a lower salary than he is accustomed to. But he may also receive stock shares that in the long run can be worth far more than the forgone salary. He also earns the satisfaction of helping create a successful enterprise.
Selecting the Accounting System
The startup CFO chooses the accounting software for the company and sets up the general ledger -- the list and organization of financial accounts the company will use. The CFO must select a system that can grow with the company so it won’t have to be scrapped and replaced with a system with greater functionality later on when the transaction volume and the reporting needs of the management team are much greater.
Development of a Business Plan
Companies that are thoroughly planned out before launch are more likely to succeed than those with poorly thought-out strategies and a sketchy financial plan. The startup CFO coordinates the development of the business plan. This requires being able to research the market and competition, and work with the other members of the team to hone the company’s strategy. The plan is often presented to investors the company hopes to obtain financing from. The CFO must know what investors expect to see in a plan, and how to present the information in an engaging way that will stimulate investor interest.
Cash Flow Planning
Startup companies that fail often look back and determine the cause was poor cash planning and management. The management team underestimated how much money would be needed to jump-start the company’s sales, and spent money on things that did not contribute significantly to either revenue generation or helping the company run more efficiently. The CFO of course cannot generate sales by herself, but she is responsible for maintaining an accurate cash flow forecast so expenses stay under control and the company has cash on hand to fund operations. She must also alert the CEO when a cash shortage is likely to occur so he can take corrective measures such as postponing planned expenditures.
Designing Management Reports
The company’s management team requires timely financial reports containing the most important information it needs to guide the company’s growth. The CFO of a startup creates the templates for the management reports. To do this, he must have an understanding of the specific information needs of each of the key executives. He doesn’t want to waste their time reading reports that aren’t useful.
Hiring Initial Accounting Staff
The startup CFO hopes that with the growth of the company, she can spend more time on financial analysis and planning and less time on the day-to-day routine accounting tasks such as entering journal entries onto the accounting system. This requires building an accounting staff. She must find staff members who are comfortable working in a startup environment where each individual juggles a number of accounting functions at once. She must also choose people who can be effective managers when the staff level reaches a point not everyone can report directly to the CFO.