What are the top 3 skills a CFO of a startup needs?

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Kruze Consulting Startup Q&A Author
Vanessa Kruze Founder, CPA

A good startup CFO has mastered the skills of financial reporting/financial management, financial projections/budgeting, and startup fundraising.

Financial reporting/management

Tactically, this usually means working in QuickBooks to correctly close the books each month, pay and collect revenue and bills, and report out to the other executives and board on financial progress. There is a ton that goes on behind actually getting the books done right - making sure you know which expenses go to which department, how the expenses are recognized, etc. Paying invoices on time, and collecting revenue are also important for managing the company’s financials - in particular for enterprise, manufacturing and medical/biotech startups, who might have major contracts with vendors or clients.

Strategically, it includes understanding the company’s unit economics and how key decisions impact cash flow. Is the company actually making money on the sales? Is the marketing spend ROI positive? Don’t forget about how important it is to be able to review the contracts associated with major clients and purchases - there is a lot of skill negotiating contracts, figuring out how to get paid on time by clients without pestering them, etc.

Financial projections/budgeting

Tactically, this means being able to manipulate a spreadsheet and produce reports that help the rest of the company understand the financial implications of the startup’s strategy. It also means comparing the company’s actual performance against the budget.

Strategically, your reporting should inform where investments need to be increased or reduced. You are helping the CEO spot areas that need attention, or areas that are doing well and need more resources. Importantly, you need to be the leader in the business who guides the other executives to the hard financial decisions, such as moving budget or headcount expenses from one department to the other or managing to a particular level of spending every month. You are also measuring progress on achieving the company’s strategic milestones/goals vs. the cash burn and the cash out date.

Fund raising

Startups, at least in the classic Silicon Valley sense, run on investor’s capital. The CFO plays a lynchpin role quarterbacking fund raises, in particular helping explain why a company is a good investment and how much capital is needed to reach the next stage. Organizing diligence requests, collecting data, comparing term sheets - fundraising is a critical skill that startup CFOs need to have.

Finally, there’s a bunch of legal things that happen in startups: there’s insurance, there are leases, there are sales contracts to review, there are loan documents; there’s tons of stuff that the CFO can actually manage for the CEO.

My firm, Kruze Consulting, is an outsourced CFO to over 170 startups, and our COO has a video that goes over some of things that a startup CFO has to do here you might want to watch. We also have published a few template accounting and finance job descriptions that might be helpful.

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