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When should you hire a CFO? 5 telltale signs

The following is an excerpt from our new eBook on Hiring a Part-time CFO.
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The following is an excerpt from our new eBook on Hiring a Part-time CFO. Read more below, or get the full version right here.

It may make sense at the beginning of the road to be more focused on hiring additional developers, designers or salespeople, than a CFO. After all, the founders can handle record-keeping and tax returns for wi-fi bills and office sandwiches themselves (or with the help of an outsourced accountant).

But it’s important to recognise when this approach ceases to be viable, and a higher level of expertise is needed. And while the exact time to hire a CFO will change based on the type of operation you’re running and the financial savvy possessed by existing founders, here are a few telltale signs that you need one:

1. Growing volume of sales (e.g., over £500k ARR) — particularly if the rate of growth is also accelerating

This amount of cash is a simple but significant indicator that if a CFO isn’t needed now, it won’t be long until they are.

2. Ongoing difficulty collecting accounts receivable

There are few things more exhausting than chasing, but an experienced CFO can make the current management’s lives so much easier.

3. Significant fundraising (e.g., institutional round from VCs)

As may you well know, large raises require a huge amount of experience and insight to pull off without a hitch. A CFO will add another string to your bow when you need it most.

4. Founders lack the required expertise in strategy and planning, financial management and fundraising

(Who doesn’t love management teams that know their own blindspots, right? Self-awareness is next to godliness…)

5. An increasing amount of resources are devoted to finance-related tasks: document preparation, due diligence, vendor negotiations

We’ve said it before and we’ll say it again – avoid hiring a CFO if you are passionate about due diligence.

 

Of course, these indicators shouldn’t be viewed in isolation. They are merely warning signs that need to be used as part of a holistic decision-making process that includes your current financial situation and aims for the future.

For more information on how best to bring in your new finance expert, have a look at our Founder’s Handbook on Hiring a Part-time CFO.

Toby Douglas-Bate

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