Blog Article

For Startups: Best Practices from the CFO Suite

Alex Lee



White Paper

Mar 28, 2023


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. 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?

  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

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.”

  • “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.”

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.

  • 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.

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.

  • 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: — 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.

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.

  • Payroll services to handle payday tasks.

  • Analytics reports and campaign monitoring.


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.

  • 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.

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?

  • 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?

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.

  • 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.

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

  • Baremetrics charges $300 per month

  • ProfitWell is free (pay for add-ons)

  • SaaSOptics charges $900 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.

  • 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.

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.

Alex Lee

About the Author

Alex is the Co-founder and CEO of Truewind. He's a 2x startup founder, both companies backed by Y Combinator. He started his career as an aerospace engineer at Boeing. He got his MBA at Columbia and BS in Aerospace Engineering from USC.