Best Practices from the CFO Suite

  1. How do you view the responsibility of the CFO suite?
  2. System for a high functioning finance office
  3. Integrating disparate finance tools
  4. Getting full visibility to subscription revenue
  5. Financial planning of the CFO suite
  • “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.”
  • “Building strategic goals with the CEO and Board of Directors, then making sure the functional organizations get the information they need to execute on the strategy.”
  • “In the startup world, unit economics is the new product market fit. Especially in times like these, it’s very important for unit economics to be strong. This task falls to the finance leader.”
  • “The CFO suite doesn’t want to be the “department of No.” Rather, our job is to provide a framework for the department managers to think about their own budget.”
  • “It evolves with stage. At the early stages, it is cash flow management. As a growth stage startup, the question is how to achieve profitability while continuing to invest in growth.”
  • “There are three primary components to the CFO position. One is accounting: you need this done properly to inform the next two. Second is financial planning: how things will develop in the future. Third is financing and cash management.”
  • Loading and Backup — NetSuite loads quickly and backup happens behind the scenes without any downtime or need to get off the system.
  • Multiple User Performance ­- NetSuite can be used by multiple users simultaneously and doesn’t show any performance issues.
  • Application Access — NetSuite loads in any modern browser from any location. The client is free to be mobile.
  • Security and Audit — NetSuite role-based permission can be very granular and includes audit trails illustrating who made field level changes including before and after data element changes.
  • Expense report software: Expensify & Brex — Both are sufficient for expense reporting and reimbursement. Brex offers a corporate credit card.
  • Customer relationship management: Salesforce — The favorite CRM tool for SMBs and enterprise companies. A few respondents noted using HubSpot but almost all are switching over to Salesforce.
  • Billing and invoicing software: Bill.com — Cloud-based platform to pay vendors through direct bank transfer or sending a check. SMBs often use multiple billing platforms because their customer, the large corporation, may use a different billing service.
  • Payroll & HR software: Zenefits & Rippling — Zenefits is the leader for SMBs and Rippling is rapidly growing. Rippling offers an end-to-end software solution, from sending an electronic offer letter to a seamless onboarding experience.
  • Answering service to take customer service phone calls.
  • Payroll services to handle payday tasks.
  • Analytics reports and campaign monitoring.
  • 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.
  • Recruiting — Startups in hypergrowth phase must decide between hiring a full-time recruiter vs retaining a recruiting firm. The latter option is expensive with the company likely paying a substantial premium compared to an in-house hire. The premium is to pay for the flexibility; the company can turn off the service anytime.
  • Each month, how much of our ARR is from new contracts? Existing customers expanding? How much ARR churned?
  • What is our revenue split between subscription vs professional services?
  • What is our gross revenue retention rate last month? How much is attributable to one customer success team vs another?
  • How much revenue are we recognizing? What does the revenue waterfall chart look like?
  • 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.
  • Cloud: This is the software-as-a-service business model. The vendor hosts the software on its cloud server. The client pays a monthly or annual subscription fee to use the software. The benefit of hosting on the cloud is simplicity to push updates. Each software update is automatically pushed to the customer.
  • Turn License: The vendor provides the software solution on-premise but charges a subscription fee, identical to a SaaS business model.
  • 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.
  • ChartMogul charges $725 per month
  • Baremetrics charges $300 per month
  • ProfitWell is free (pay for add-ons)
  • SaaSOptics charges $900 per month
  • 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.
  • Data challenge: Each month, the CFO suite has to match cash receipt with billing. The data from Salesforce may not match the invoicing data. It’s often due to the timing of recording; nonetheless, it’s a manual process every finance leader has to deal with.
  • Incomplete information: The financial information is only as good as the data from the source. For example, if the sales team is not updating its CRM, the finance team is working with incomplete data. This problem seems to reside mostly with sales.

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Alex Lee

Alex Lee

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