Why the onus of fine balancing solely rests on CFO in a startup

ByDeepak Narayanan

A start up is much like the car that all driving schools have with two sets of controls, one with the promoter and the other with the CFO. It is upto the CFO then to determine whether and when to accelerate and when to apply the brakes on the fast growing start up’s growth. Here’s a look at some of the challenges that the CFOs are likely to face in their roles in a start up.

Chemistry

In a startup, the CFO is supposed to play the role of the trusted confidante of the entrepreneur, who might have opposing views to the promoter. A key challenge for the CFO is to walk the tightrope between his role and mindset, where one is telling him to tread cautiously and the other urging him to take risks. He also needs to be able to convince the promoter that sometimes divergent views are key to arriving at the company’s shared goal in the most effective manner.

Trees Vs Woods

Unlike a relatively bigger company, a start up requires its CFO to provide inputs on the direction it will go. It is therefore a shift in the mindset for the CFO to start looking at the business through the entrepreneurial telescope rather than the cost reduction microscope. That is not to say that the minutiae are not important. However, it is equally important to be able to look at the big picture.

Relationship manager

Yes, that’s right. The CFO is most likely the conduit between the investors and the entrepreneur. Communication then becomes a key area of focus for the CFO who needs to manage the investor expectations as well as the entrepreneur concerns of increased accountability and decreased control.

Jack of All Trades

In the initial stages, a start up would not have the resources to appoint specialists for carrying out different functions. A CFO must therefore contend with requirements of skills other than finance primarily in the legal and technology areas.

Boot strapping

The CFO’s biggest challenge in the startup is to juggle cashflow in the company. Therefore it would be key to understand the ways in which every rupee can be stretched, every receipt to be timely and every payment as delayed as possible, using innovative negotiations and making every asset, the company has, work.

Dotting the Is and crossing the Ts

The one thing that the CFO is definitely looked upon is to bring in processes, reporting and structure that would help understand the current and future standing of the business. Very often that means a series of dashboards (cash and expense runways) and MIS which the company is not likely to be used to. The challenge is therefore to pitch the reports as an effective way of keeping your finger on the pulse of the organisation and not an unnecessary filling up of endless documents which are likely to draw you down.

As an entrepreneur of a start up, the biggest challenge that one faces is conservation of Cash. What you really need is a Chief Cash Officer. If there is one who is concious about this, hire this person right away!
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The author is co-founder and director, MyCFO.**