The CFO at any company is challenging in both its depth and breadth of responsibilities. At a start-up company, the most precious resource known is CASH. For technology and many other companies, Cash tends to first be allocated to R&D as they are the creators of the product. Once the product gets ready for production, the Sales and Operations organizations begin to grow to support growth in the ultimate chase for more cash.
Having spent about 30 years in Finance with multiple of those years at start-ups including being a CFO for 5 of those years, I have always understood and agreed (but not liked) that administrative functions, especially those at a technology driven company, are the last to get funded as product development and revenue generating activities will always get the lion’s share of the budget dollars.
Given this, since the CFO is typically responsible for administrative functions, the breadth of their responsibilities is typically quite wide. Expert knowledge in Finance is obviously mandatory, but strong working knowledge in the company’s business, Human Resources and Legal is often required.
The role of the CFO
The two primary roles of any CFO are 1) to control and protect the assets of the company, and 2) accurately and report timely the results and financial position of the company. After those two objectives are satisfied the CFO typically strives to be the key business partner to the CEO by providing insightful analysis and financial perspective to various aspects of the business.
A CFO in a start-up has the added burden of needing to obtain an exceptional solid working knowledge of HR and Legal in order to satisfy the first objective of protecting the assets of the company, because they may be the very person performing the day to day tasks given that many start-up companies cannot afford a lawyer or even a part time HR employee. With the knowledge that one mistake in either the handling (or lack thereof) of a personnel issue or in a contract negotiation with a customer can be so devastating it can break a company, one can quickly understand the importance of knowing when to call “time out” in order to seek expert advice from a professional in the field, before it is too late.
The importance of knowing what you do not know
Often, the most dangerous position that anyone can be in is when they do not know what they do not know. In that state, a person is not even aware of the potential landmines that need to be avoided and therefore will not seek critical advice at the right time. By way of example, a CFO without some strong legal experience, from which to draw upon, would very likely underestimate the significance of seemingly innocuous contract boilerplate items such as “warranties and representations” or the term “best efforts” when negotiating a supply agreement with a customer. However, these two legal definitions can have such significant and expensive obligations to ensure compliance and/or onerous remedies to correct a non-compliance condition that they should be avoided at best or fully understood before proceeding. Seeking the advice of a good lawyer at this point may be warranted, but you have to at least understand the situation to realize the criticality.