Best Practices from the CFO Suite


In the current economic crisis, business leaders from early-stage startups to large multinational corporations have had to make difficult decisions. The financial implication of these decision is critical and the CFO is the executive helping the CEO navigate these decisions. Historically, the CFO role was focused on backward looking information: ensuring on-time and accurate financial reporting. The CFO role has evolved into a highly strategic role but needs a robust system to handle the day-to-day reporting tasks and generate accurate financial information.

My motivation was to understand the responsibility of the CFO suite, the process of billing to accounting, and the software tools available to run an effective finance office. I interviewed 50 people that held CFO, finance manager, and financial analyst type roles. The companies represented include venture backed startups, mid-sized businesses, and large multinationals.

The findings are heavily geared towards software-as-a-service technology startups. The interviews were conducted starting March through July 2020.

In the following, you will find a synthesis of the key findings on the following topics:

  1. How do you view the responsibility of the CFO suite?

How do you view the responsibility of the CFO suite?

The following are select responses from the finance leaders. Their titles include CEO, CTO, COO, CFO, and VP of Finance of venture-backed startups. Edited for readability.

  • “Pre Series B, it’s a part-time role to simply track past financial numbers. Post Series B, it becomes a full-time job to support strategic planning. This includes segmenting where revenue is coming from, how to best allocate capital, setting equity financing strategy, and identifying other sources of financing.”

System for a high functioning finance office

Traditionally, the chief financial officer (CFO) is responsible for tracking the company’s past and present financial situation and ensuring on-time and accurate financial reporting. Today, the CFO is expected to inform strategic decisions that drive the success of the company. Yet, a significant amount of time is spent on tedious tasks.

It is critical to get the repetitive tasks correct because those deliverables feed into financial planning and strategic planning. If the book keeping is incorrect, then the CFO is running financial analyses based on incorrect information. To minimize errors and increase efficiency, these are the popular software solutions.

Accounting is a driver for software selection

For accounting software, the industry standard for startups and SMBs is QuickBooks. It connects with bank accounts and corporate credit cards to track financial information. Forward looking financials are tabulated elsewhere, typically on Excel. For companies that have heavy inventory, using QuickBooks may require more manual intervention. QuickBooks is sufficient for small businesses but has limitations as the business becomes large and complex. These limitations are the key driver for growth stage startups to eventually transition to an enterprise level accounting tool.

For enterprise level accounting tools, there were a few mentions of Sage Intacct but the popular choice is NetSuite. NetSuite is an integrated business platform that eliminates the requirement of separate software applications. It can process the data of sales, customer relations, marketing, and human resources. Other features include:

  • Loading and Backup — NetSuite loads quickly and backup happens behind the scenes without any downtime or need to get off the system.

When to switch: When a company reaches ~50 employees, the management begins thinking about switching to NetSuite but it can be difficult to justify a 10x price increase from QuickBooks. Between 50 to 150 employees, many startups transition from QuickBooks to NetSuite.

Rounding out the finance software stack

  • Expense report software: Expensify & Brex — Both are sufficient for expense reporting and reimbursement. Brex offers a corporate credit card.

Integrating disparate finance tools

Many startups use at least 5 unique software tools to manage the finance office. Each tool houses different data and serves a different purpose. As a result, there is high touch to ensure data moves around the company on-time and correctly. While it may be appealing to integrate all the systems, there is a trade-off between integration and flexibility.

One solution that some companies attempted is to use one tool for multiple applications. For example, QuickBooks is known for its accounting capability but it also offers limited functionality for generating quotes and invoicing.

Using best-in-class software may require more manual touch but it unlocks more functionality to accurately track the business. Whereas applying a sole source system, data across the financial process is integrated but there is less functionality. Of the finance leaders interviewed, only a few companies chose the sole source approach. Vast majority of companies prefer to have more functionality.

In-house hire vs third-party firm

Outsourcing to third-party firms is a necessary option when scaling. Not every task will require a full-time or even part-time employee. The benefit to bringing on a third-party is getting a specialized worker who is already trained, experienced and can do the work well at a cost that’s reasonable to the company.

Choosing what to outsource to third-party companies can be challenging. Tasks that slow down individual team members is a good place to start. There are some tasks that everyone dreads. These are often time-consuming, repetitive tasks that need to be done regularly, but that can easily be transferred to someone else to boost productivity significantly. A few examples:

  • Answering service to take customer service phone calls.

Accounting and recruiting are two tasks that several early-stage companies look to outsource rather than hiring someone in-house for.

  • Accounting — Nearly all companies responded using an outsourced accounting firm for general book keeping in the early days of the company life. Example accounting firms include Attivo Partners and Keating Consulting. This is paired with QuickBooks. After hiring a finance leader, the accounting firm is usually retained to handle book keeping while the finance leader focuses on financial forecasting and strategic planning.

Getting full visibility to subscription revenue

Majority of the companies interviewed for this report are venture-backed software-as-a-service companies. At the growth stage (roughly post Series B), the customer base often gets large enough that tracking revenue becomes a challenging task.

  • Each month, how much of our ARR is from new contracts? Existing customers expanding? How much ARR churned?

These are complex questions to answer and few companies would have an in-house expert on this subject, especially in light of the new accounting rule for revenue recognition.

GAAP Revenue Recognition Rules

Effective December 2018, FASB changed the guidelines to recognizing revenue under ASC 606. The new accounting standards aim for international alignment on how companies recognize revenue from contracts with customers.

For software, there are two forms of deployment but three forms of payment schedules. Software can be deployed on-premise or by cloud.

  • On-premise: This is the perpetual maintenance model. The vendor sells a perpetual license to the customer. The software is installed on the client server. The pricing structure is a high initial set-up fee plus an annual maintenance fee. The upgrade process is difficult because the customer would need to migrate the data to the new software then redeploy each update.

From a financial statements perspective, the software-as-a-service model is preferred because the revenue model is more predictable. The perpetual maintenance model fluctuates more as a substantial piece of revenue is recognized upfront. Many on-premise providers have transitioned to cloud. For those that haven’t yet, they may charge a subscription fee similar to cloud solutions. This is called Turn License.

  • Turn License: The vendor provides the software solution on-premise but charges a subscription fee, identical to a SaaS business model.

ASC 606 Restriction: While the turn license model creates a more attractive financial statement, per ASC 606, companies must recognize revenue in accordance to its revenue model. In other words, for Turn License cases, the vendor may charge a subscription model but it must recognize revenue per the perpetual maintenance model.

Software solutions for revenue visibility

For companies looking for clarity and visibility in their revenue, ChartMogul, ProfitWell, Baremetrics, and SaaSOptics were primary solutions. All four solutions serve subscription and SaaS businesses by providing all subscription reporting and analytics in one place.

  • ChartMogul, Baremetrics, and ProfitWell are sufficient for businesses that don’t have much variation in their subscription business model. Netflix and Spotify are examples of companies with limited variation.

If your business sells software subscription services to an enterprise and you deal with complex revenue subscription, SaaSOptics is a strong solution. While the platform does not have the best user interface, the feature set is comprehensive.

Pricing also varies significantly. Their pricing model is as a function of the customers’ MRR. Assuming a company has $250K MRR:

  • ChartMogul charges $725 per month

Financial planning of the CFO suite

There will always be a need for someone to balance the books, and perform critical routine tasks but the CFO role is much more dynamic today. Their value is in strategic planning. This includes designating resource allocation, using financial information to inform product planning, and identify M&A opportunities.

There are several tools at your disposal to elevate the financial planning function, which will ultimately inform the strategic planning. The right tool for you depends on the size and stage of your company.

For early-stage companies, there is little to no financial planning involved as there is limited financial information. As a company matures, there are several mid-tier financial planning and analysis tools on the market, including DataRails and HostAnalytics. Due to limitations of these tools, the majority of financial planning work still occurs on Microsoft Excel.

When companies switch to Oracle NetSuite, they can get access to an add-on called Hyperion. Hyperion is Oracle’s financial planning and analysis tool that sits on top of the ERP, making it a popular FP&A tool. However, its interface is described as “clunky.” Several mature enterprises have opted for Anaplan over Hyperion for its comprehensive financial planning suite. For a large enterprise to set budget and forecasts across dozens of departments, it’s near impossible to keep the information consistent on a spreadsheet. Anaplan handles this problem well. Be prepared to pay up for Anaplan, it is an expensive software tool.

Strategic planning — Many startup finance leaders noted the same strategic challenges that they have to solve:

  • Cash spread: Companies are paying their vendors net 30 days but enterprise customers are negotiating for net 60–75 days payment terms. The mismatch between accounts receivable and accounts payable result in an unpleasant cash spread.

Thank you to those who made this possible

I would like to thank the participants who participated in the interview and hope the readers find this report helpful. The views and opinions expressed in this report are my best interpretation of the 50 interviews I conducted and do not necessarily reflect the views of my employer. Feel free to contact me if you have comments or follow-up questions.



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Alex Lee

Co-founder, CEO at Bluelight (YC W21). Angel Investor. Writing about the intersection of finance and startups.