CFO Toolkit Series. Get the basics right!

The temptation is to control as much as possible

Being a rollup CFO is no walk in the park, especially when you’re juggling M&A, IR / fundraising, and finance simultaneously – which was my remit at Threecolts, an ecommerce enablement software rollup founded in mid 2021. The transactional nature of M&A and fundraising starkly contrasts with the continuous, and often uncelebrated, tasks of finance. There are not many people who excel at all three. Add a high growth environment into the mix, and if you’re not careful, you might end up on an expressway to burnout. 

Here are my 7 learnings.

Learning #1: own your data

As a CFO, you should own transaction level data. Real-time accessibility and maintenance of management KPIs such as NRR, churn rate, and organic growth are crucial. If you’re feeling hamstrung by the lack of comprehensive enterprise resource planning (ERP) or CRM systems; or if your data lake isn’t up to scratch – get creative with Google Sheets and APIs. Save every piece of data from Day 1 and don’t wait for someone else to do it. 

In other words: dive in, build databases yourself to really understand them – and train someone later.

Learning #2: tackle reporting piecemeal

The businesses you’ll be acquiring are small and have threadbare reporting. Upgrading to lenders’ requirements can be difficult. And, since debt is the rollups’ rocket fuel, there’s no way around things like monthly covenant testing and audited financials. What to do? Try this framework:

  • First, rebuild the chart of accounts by going over every single line item in the P&L and (re)classifying it. Should affiliates be under Cost of Sales or Sales & Marketing? 

  • Second, if you aren’t able to transition to accrual basis accounting in one go, break it down to bite-size chunks. First, calculate deferred revenue liability. Then, prepaid and accrued expenses. Later, intangibles amortization

  • Finally, ensure transparency for all stakeholders as you go along – in case you have to restate management accounts

Learning #3: ROI-focused approach

Avoid tackling everything at once. Instead, focus on incremental improvements with tangible ROIs. In your first year, don’t commit to projects that take longer than one quarter to deliver. Rank all projects by urgency, resource commitment, and ROI, and communicate these timelines to your team and your CEO.

Learning #4: avoid interfering with product strategy

This partially contradicts the previous point since, uhm, not all product decisions necessarily have positive ROI. What do you do? 

  • Before taking up the CFO role: ensure alignment between governance, decision-making, and your expectations

  • After: influence decision making by providing input supported by third party data that only you see, such as investor and auditor feedback; or peer benchmarking

Learning #5: automation and routine

Implement Standard Operating Procedures (SOPs) for tasks like month-end closings, to minimize human error and to protect your team. Note: SOPs also make new hire onboarding and audit processes much easier:

  • Start by writing down your processes

  • Find inefficiencies or errors by reviewing the SOPs

  • Continuously improve processes – and don’t forget to update SOPs

  • Repeat for every single workstream

Here’s a slide that I used with my team to illustrate the point:

Learning #6: embrace rejection

For CFOs, rejection is part of the game. Whether it’s from your colleagues, the CEO, investors, M&A targets, or potential hires; it’s essential to manage emotions and not take it personally. Instead, be open to feedback and keep improving.

Learning #7: manage the scope of your role  

You might be tempted to shoot for a “strategic” CFO role with a far-reaching remit. Consider your strengths. If you thrive in a transactional environment, perhaps the Head of M&A is the way to go? On the other hand, if you don’t enjoy pitching, but prefer building reporting systems – you’re a better fit for the Finance Director role. To begin, choose either. Trust me, there’s more than enough for one person! As the company grows and you can hire into both these teams, you can broaden your role.