Skinny G/Ls

Because I work in build stage companies, and often early ones at that, the general ledger (G/L) system I encounter the most is Quickbooks Online.  Often one of the first questions I get is whether we need to make a change to a more robust system.  Always my answer is no.

My philosophy on this is that until a company is much bigger, having an accounting system that knows all isn’t worth the workflow change, the financial investment, and the upfront systems hassle.  Quickbooks Online (QBO) is fine.  It’s not great — but it’s fine.  It does the basics and has the benefit of having tens of thousands of qualified people who know how to use it.

What I would rather do is invest in smart systems around it that do their functions well, and integrate with it.  This can be A/P (bill.com), ERP-lite (Fishbowl), payroll systems (any of them), expense management (Expensify), cap table management (eShares, Carta), sales tax (Avalara), and on and on.

If a build-stage company is going to invest in systems, it probably should be in optimizing Salesforce.  Or if it’s an e-commerce company, better to get your Shopify instance really singing.  Building a sole source of truth about all things customer is way more important than implementing an expensive G/L system.

I’m a believer in keeping the G/L’s functions limited.  I use it for management and Board reporting and as a transaction repository.  That’s it.  For anything else, there is a better system out there and most are not expensive either.

I’ve seen $50M software businesses backed by some of the most sophisticated venture investors in the world run their businesses and do their reporting based on QBO.  If they can do it, I figure I can too.

What CFOs do

Often I am asked what a CFO does. Usually this happens with a smaller (build stage) company that doesn’t have one, or has hired a part-time CFO who mostly focuses on being an excellent controller. There is nothing wrong with this – but it’s different from what a CFO does.

In build stage companies, CFOs first and foremost help predict and manage cash. This means some level of forecasting of the future (finance) which controllers can but don’t often do.

Side note; CFOs are not credentialed, unlike (say) licensed service providers like plumbers or electricians, so it’s not surprising that many controllers hang a shingle and call themselves CFOs. Some are excellent. Some manage that transition less well.

CFOs also help drive understanding and optimization of unit economics. In retail, this is almost always on a square foot basis. In staffing, it’s on a per hour basis. Getting to this point requires some insight and continual honing. CFOs should be good at constant, incremental improvement and knowing how to fine-tune what comes out of the accounting function. The result is that they should be helpful on the top line, in addition to managing costs.

Finally, a CFO needs to be able to build a team. I use the term ‘team’ expansively as this includes not only employees and contractors, but also insurance brokers, lenders, auditors and outside accountants, systems gurus, benefits experts…. on and on. Litmus rest: If you are taking to one of the top growth company lenders in town, a CFO probably will have them on speed dial already. This is part of what you are paying for.