With the start of the New Year came a new fund; and with the start of a new fund came new 212 traditions. As of March 28th we started what we hope to be the first of many 212 Meetups covering a variety of topics related to tech, startups, business, design and anything that tickles our fancy.
As the CFO of this fine establishment I decided to take the horse by the reins and get this party rolling with a more serious and hefty topic…that of the finance director or CFO’s role in a startup. I want to give the entrepreneurs a View from the CFO’s seat. Much of the time the knowledge pool that comes from the CFO or financial director is ignored and the value overlooked much to the entrepreneur’s detriment. For this reason, we brought together two seasoned CFOs from great companies. We had the privilege to chat with Ilkay Duzgun from Iyzico and Gulnur Anlas from Logo. Both companies are superstars in the Turkish ecosystem and both CFOs have been key team members that saw the companies through to their current success.
For those who weren’t able to be there, here are some of the highlights.
You must know where you came from to know where you are going
One of the keys to life and business is to know where you came from and to than set your goals for where you are going. The finance director’s role is to help the CEO do exactly that. In order for the CEO to understand the successes and failures of his decisions he needs to look to regular KPI and financial statement reporting and analysis. One of the key themes coming from the panel was that it’s not about a set of numbers sitting on a spreadsheet. It’s about analysis and communication of what those numbers reflect. In the end, numbers are just numbers; with out the right analysis it’s not useful. But with the right examination and communication the financial and KPI reporting can help a company really understand the power of their decisions, if they should continue with those decisions or if they should take a different road. Gulnur gave a great example of the power of reporting in their ability to fundraise but more importantly be able to manage the market downturns that Logo has experienced in it’s life. With this reporting they were able to get through the major crises many other competitors were not able to.
Once you understand this you can move on to the future and looking ahead to what will be next. That’s where the budget comes in.
Budget budget budget — Everyone owns it
It was Ilkay’s key driver for her success with Iyzico. Budget budget budget; her key point is it’s not just the finance department’s responsibility but also each department’s head. It’s so important to budget with the realities of the business in mind. A budget that hasn’t been thoroughly worked through with the exact business strategy has no basis and no use. It is key to set the revenue forecasts side by side with the sales team to make sure those initiatives set match the goal and the output the company is aiming for.
The right first finance hire is key
If you’re not ready to hire that finance person, it’s key for the CEO to really understand and own the numbers at the beginning but also through out the life of the business. If you can’t hire the finance person to drive that then the CEO must. Gulner says.
Ilkay points out, With the budget in mind, if you can hire one developer you can hire 3 finance people. Instead of that one developer take the time and the initiative early on to hire the right finance director. It’s more cost efficient both in the moment and in the long term to hire that finance director instead of that extra developer early on. You are investing in the long-term success of the business and with that finance director you can assure the continued success and sustainability of your business.
A great audience member asked a question that is so key. “But how do you know who to hire for this role?” This is such a loaded question and so right to point out. We on the panel all agreed it’s not an accountant but someone that is a financial controller an analyst a thinking mind per say. You can always outsource someone who can put together the reporting, that is an accountant. What you need is someone who can analyze those numbers, give you a direction with those numbers and really bring insight and inquiry to the CEO.
Get someone who can say NO to you. It is key.
What does this mean in practice? Try to find someone who has had reporting responsibly to key decision makers in a company. Usually this means financial controllers or financial directors. In addition, you really want someone who is going to be asking you questions about your business, your product, your customer and your expected future growth in the business. If they aren’t questioning these things they aren’t the right fit.
CFO “Just say NO” and be the Enabler of Dreams
You can have a great founder and a great product but that doesn’t automatically equal a successful business, and I think that’s where the finance role is key. The right hire is the person who is going to enable the business to emerge and succeed. They are the enabler of the dream. Ilkay says that it’s the job of the CFO to tether the dreaming CEO to this earth in-order to assure the dream can come true. Just remember if the CFO is saying No to something there is a reason and listen. In the long run it will pay off and assure your continuous success.
Lets get technical — Tools and Keys to the trade
Some more practical information was shared in the meeting that should be highlighted here as well. One relates to some key tools that all the panel agreed are important for the success and functioning of the KPI and financial reporting. This is a great ERP system and a great reporting system. Unfortunately two are not always the same. At Logo they use both the Logo accounting system and reporting tool. At Iyzico they use Logo as the accounting system along with Tableu. Tableu is great because it helps to truly automate the finance, reporting and analysis. It can be linked to other data sources like Logo, Iyzico, sql and such. What’s so important about the reporting tool you may ask? Well the ERP system is really a database holding all that information and the minimal reporting that it does isn’t enough for the analysis and understanding you need to run the business.
The other more technical side that was touched on is some more accounting and finance vocabulary and reporting structures. One key point I want to make sure to drive home is the importance of IFRS reporting (accrual based) versus Cash reporting and Turkish legal reporting. These are all three different ways of looking at your business results with three very different purposes and points. All three equally important and all three must be addressed.
I see the CFO as the dashboard to the car. He or She is the key partner to the CEO warning them of upcoming danger. They are the navigators helping the CEO reach his destination. It is so important to have that person right there with you on the path showing you the realities of your dream and really putting the hard pieces together to help you get there. The CFOs are your support behind the curtain.
