What Does a CFO Do?

The Chief Finance Officer or the “CFO” - such a sexy title that everyone seems to use it nowadays, regardless of whether they're qualified for it or not. 

Since I provide Controller & CFO services for a living, I thought I'd outline what I believe are the required skills and responsibilities of a CFO. 

Titles without Substance

The title of a CFO is becoming empty as titles are handed out like candy: “Chief Strategist” and “Chief Growth Officer” and “Chief Evangelist” - what the hell are these anyway? Everyone is a chief of something.

But the CFO isn’t a new title - it’s been around for a long time; however, as newly minted startup founders are building their teams they assign the title to the first person who “is good with numbers”. How and Why is this happening? Well that’s because few really understand what a CFO does and what distinguishes a good CFO from a mediocre one.

The Responsibilities

CFOs are generally strategic roles and their primary objective is to ensure the FINANCIAL FUTURE of the business is secure. With that in mind there are certain things that the CFO owns as tangible responsibilities.

The responsibilities of a CFO can be broken down into a few general categories:
  • Management of People
  • Financial Planning & Analysis
  • Building & Managing the Financial Infrastructure
  • Financial Reporting
  • Equity
  • Fundraising and Investor Relations


Managing the Finance Team

The CFO is rarely the only finance person in the business. Bookkeepers, Accountants, and the Controller are under their management. The CFO needs to be able to manage, inspire, and lead them to build a financial infrastructure that will help ensure future financial security of the business. 

Compensation Plans

On top of managing their own team, the CFO will be an integral part of designing compensation plans for everyone. How much should employees be paid? In what form? Should they get equity? And how does it all align with profitability and the financial future of the business? Detailed answers to all of these questions is within the scope of the CFO role. Usually the HR personnel have a big say in this as well as the CEO, COO and other executives but the CFO wraps it all together in a coherent financial plan.


The CFO spends most of the time thinking and planning for the future and how much money the future will bring and cost. Analyzing historical performance, gathering data points and costs on anticipated decisions is usually done by one or more  analysts, but the CFO manages it all. Unless it's a startup, in which case the CFO will absorb this function entirely. That includes financial modeling, variance analysis, and so on. 


The CFO makes sure the financial statements are accurate and can be used to make decisions by both management and by external parties such as investors. Believe it or not, making sure the financial statements are accurate and correct isn’t so easy. CFOs are expected to report financial statements in accordance with Generally Accepted Accounting Principles (“GAAP”). GAAP is a confusing tome of industry guidelines on how accounting should be done in certain situations and transactions. CFO usually rely on a knowledgeable Controller or a person with a CPA license to manage this because it becomes overwhelming and time consuming very quickly. CFOs need to be skilled enough in accounting to manage financial reporting properly. 


Every business, regardless of size, has a financial infrastructure. It’s an entire environment of intertwined systems and processes that ensure the financial operations are running smoothly. Although the CFO will be too busy to actually manage the design, implementation and management of systems, and processes. The CFO will manage the financial infrastructure, its operation and development as a whole. The Financial Controller will be the one to actually design, implement, and manage the day to day of systems and processes.


The CFO does not do bookkeeping or accounting. They shouldn’t at least. Inexperienced CFOs (usually when hired by a startup because founders don’t know how to hire for a CFO) tend to fall into the bookkeeping and accounting trap. CFOs are paid too much to spend time on bookkeeping and accounting. If your CFO is doing bookkeeping, figure out what’s wrong! The Controller shouldn't being doing that either for the same reason. Controller oversees accounting, financial reporting, and most importantly the design and implementation of financial systems and processes. 


CFOs need to understand how equity works. No, it’s not just “knowing what stocks are”. CFOs need to understand:
  • how cap tables work
  • How employee stock options work
    • And how to stock plans should be structured long term
    • How fundraising affects stock options and stock plans
  • how dilution works 
    • And how to reduce it
  • how convertible vehicles work 
    • what their impact is on the ownership structure
  • how multiple funding rounds will affect the ownership structure over time
  • How exits work and how they affect each investor and stakeholder
  • How exits and equity ownership affects taxes
  • How to strategize and preventing excessive dilution 
  • How the ownership structure of the business will change over time
    • not just ballparks...exact numbers. 
    • It’s not that hard if you know how to do it
A CFO who understands equity well will model the equity structure of the business multiple years and funding rounds in advance and allow the CEO to minimize costly dilution. Imagine being able to have an extra 10% of the company because you were able to plan well. 


When a business raises funding there’s a lot of work that needs to be done; a lot of it is tricky because it’s a combination of accounting, finance, marketing, salesmanship, and legal. The financial model, the deck, the due diligence package and the presentation has to be prepared in a compelling way and the CFO will be leading this effort.

The CFO may or may not have access to potential investors to make investor sourcing easier, but investor sourcing commonly rests on the CEO/Founder’s shoulders.

Before the Fundraising Round

Preparing for fundraising in advance is going to make it a lot easier and faster. The CFO will need to make the investor deck, the financial model, cap table, and the rest of the due diligence package is ready at a moment's notice. If you’re unsure of the value of preparing for fundraise in advance, imagine being an investor. You have two startup investment opportunities, one gives you everything you need and more the same day you ask for it, and the other takes two weeks. Which one do you want to do business with?

During the Fundraising Round

In a real fundraising for a startup investor sourcing is a bit of a play, the CEO attracts the investor with the vision and when the investor is sufficiently excited, the CEO gracefully says “let me connect you with my CFO and he can give you everything you need for due diligence”. This makes the company seem very professional and sophisticated while making the CEO come off like a big shot. The CEO will obviously be involved in the due diligence process, but removing the CEO from the minutia of it, will raise the CEO perceived status which in turn elevates the CEOs negotiation power when they get a term sheet. 

After the Fundraising Round

Investors need to feel in the loop and fully aware of how their investment is doing. Believe it or not, most startups do a poor job of reporting to their investors and keeping them informed, despite the fact that most startups need follow on investments. The CFO will be the one that will keep the investors up to date on financial matters with periodic reports and updates. This will create an immense amount of goodwill and trust between the management team and investors.