By Neil Portus, CFA, CMA
Neil Portus is a freelance CFO & Advisor for growth companies at Tailored Partners and a former Vice President & Equity Analyst at Goldman Sachs in New York where he covered car rental and mobility stocks.
This is Neil Portus from Tailored Partners. I work as a freelance CFO for growth companies and this video is on how to be your own startup CFO.
This videos for founders who are bootstrapping it and wearing a lot of hats as they launch. For many, a VP of finance or a CFO is a later stage hire and founders often find themselves handling the accounting and finances at the start. So I want to show the 10 things that I think they should focus on. Let’s dive in.
1. Bank Accounts and Credit Cards.
You’ll need to get these set up and protect access to them. Protect who can send and receive money. One great option is to provide read-only access to certain individuals like your bookkeeper and credit cards are great and useful to start collecting points and earn cash back for your expenses.
2. Accounting Software.
This is the heart of your financial operations and leading ones to consider at this stage include Xero and Quickbooks. You want to properly assign access here as well as this is very sensitive information. You’ll want to link this to your credit cards and bank accounts so all those transactions get automatically downloaded.
3. Payroll Service.
This sets up a monthly payroll cycle and also calculate and pays your federal and state payroll taxes. You can also consider utilizing a provider like TriNet or Justworks which in addition to payroll can also offer group benefits like healthcare and 401k.
3B. Hiring Employees.
If you plan to hire employees, be sure to get your state unemployment ID numbers and have a starter set of hiring forms: W4, I9 and an employee information sheet for each new hire. Make sure you understand the Fair Labor Standard Act as you determine salaried vs. hourly workers, overtime and record-keeping requirements.
4. Accounts Receivable.
This is about getting paid. Create invoices in your accounting software and send them to your clients. Set your payment terms to be as tight as commercially possible and assign someone to follow up on overdue invoices.
5. Accounts Payable.
This is about paying your bills. Negotiate your payment terms to be as generous as commercially possible. For larger bills, spread them out over the months that you use the service by creating bills in your accounting software for those in-between months. Create an email address such as accounting@ or billing@ to stay organized and receive all of your bills. Be sure to send and collect vendor W-9 forms and enter those into your accounting system so you can stay organized and make the year end 1099 process a lot easier.
6. Cash Reconciliation.
You should perform a cash reconciliation at the end of each month. For a start-up, this is akin to “closing the books.” You’re accounting software should download all the credit card and bank transactions but you need to make sure that they’re properly categorized. The balance on your bank statement at month end should match what’s in your accounting software to the penny to show that you have everything accounted for. If you feel comfortable, do this yourself. But, if not, hire an hourly bookkeeper to do it.
7. Financial Model and Cap Table.
Build and maintain a financial model. Externally for investors but internally for your own cash management, budgeting and hiring plans. Also maintain a cap table to track your equity ownership and make sure that everyone is on the same page as to who owns what.
8. Budget to Actual.
Compare your monthly results with your budget for the month. See how you’re doing and pare back expenses if you’re over budget. Doing this with a monthly rhythm will give you enough time to course-correct if something big is off.
9. Year End.
Hire a tax firm to prepare your taxes. Be sure to understand what documents you’ll need to collect and retain throughout the year. Be sure your accounting software or payroll service will prepare the 1099s for independent contractors and W-2s for employees. But be sure to double-check them for accuracy.
As you reach a certain size, you should find a broker to help you obtain general liability insurance for your business and directors and officers (D&O) insurance for your Board.
One Final Note.
If you’re spending more than 5 hours a week on these tasks it may be time to hire a part-time CFO. Give me a call!
Copyright 2020 Tailored Partners LLC