FINANCE GUIDE

Top challenges startup CFOs in Singapore face (2020)

April 21, 2020

While the roles of the CEO (chief executive officer), COO (chief operating officer), and CIO or CTO (chief information, or tech officer) can be quickly intuited, CFOs tend to baffle employees and stakeholders alike. What do they actually do? Are they not simply glorified accountants? Does a company even need one?

In the past, CFOs were in charge of ensuring that a company’s finances were in tip-top shape. This would involve bookkeeping, meeting national reporting regulations, and auditing. But nowadays, top CFOs like Ruth Porat (previously Google, now Alphabet) and Tom Suite (Dell) also find themselves shaping company HR policy, mapping out new funding and revenue strategies, and managing company investments.

Though no two CFOs have the same job description, many face similar challenges in the process of nurturing their business and teams to grow at their best.

What do CFOs do?

CFOs perform a wide range of functions depending on the unique needs of their company.

Apple's CFO, Luca Maestri, first joined the company as vice president of Finance and corporate controller. Now, he “oversees the accounting, business support, financial planning and analysis, treasury, M&A, investor relations, internal audit and tax functions at Apple.”

But Ajay Vashee, who has served as Dropbox's CFO since late 2016, prefers a more disruptive role. He works closely with the tech team to develop and adopt new technologies like robotic process automation in the hopes of making finance processes more efficient.

“Our team is always focused on what else we can do as an organization as we disrupt and innovate. We free up more capacity and more resources to help other people and other teams around Dropbox,” says Vashee to the San Francisco Business Times. Not only that—he leads the Dropbox Foundation and Pridebox, the latter of which is an internal organization dedicated to building a safe, supportive space for LGBTQ-identified employees.

Some other responsibilities a CFO may take on or be a part of:

  • Guide a company through changes (IPOs, funding rounds, restructuring)
  • Handle business expansions
  • Consult on internal issues
  • Investigate and research new markets of opportunity
  • Manage assets and stakeholder or investor relations
  • Handle company spending through investments
  • Forecast market trends
  • Interpret relevant data
  • Handle company compliance and meet financial regulations

Though no two CFO roles are the same, many face similar challenges, especially while defining their role and leading the company in a changing business landscape.

1. Having to wear “multiple hats” or struggling to define unclear roles

Though a report by McKinsey and Company shows that most CFO’s roles can be categorized into 1 out of 4 distinct profiles, startup CFOs may not have the luxury of ‘niching down’.

In many cases, modern CFOs are expected to be able to do more and be more, juggling roles as a growth advisor, risk mitigator, recordkeeper, business development strategist, or performance expert.

Sometimes they can be stretched to their limits: one startup CFO in Singapore admitted that the lack of an in-house corporate finance team made it extremely difficult to complete their latest funding round.

Established companies can simply ask their internal team or hire external bankers to manage the funding process, from sourcing to closing. But CFOs of smaller companies with limited budgets or a shortage of qualified staff must bear this responsibility on their own.

But CFOs also want to be more involved in strategic planning

Despite their widening roles, however, many CFOs feel that they are actually not involved enough in strategic business decisions.

Over half of respondents in a Deloitte Singapore survey of more than 120 CFOs shared that they are only consulted after the decision-making process has already begun. And a full 7% of CFOs said that, in their company, the finance team is only consulted at the final stage of the process, or _after _the decision has already been made.

Even when they’re involved in strategic planning, almost half of the surveyed CFOs shared that poor communication and resource mismanagement impedes their success in executing the business strategy.

“From our conversations with CFOs from small to medium-sized enterprises in Southeast Asia, we have observed that CFOs do not participate as frequently in business strategies as they would like to be,” says Ng Jiak See, CFO Program Leader for Deloitte Southeast Asia and Singapore.

“They are often kept in the loop only when numbers are involved. Including CFOs in the planning process will ensure that business decisions made are aligned, financially sound and hence, result in greater success during execution.”

2. Juggling investor relations and managing funding rounds

A CFO is usually the main person-in-charge for planning new funding rounds or leading the company to an IPO. They must have the foresight to begin a new round before funds are expected to end. Running out of cash is the #2 reason startups fail, so timing and managing new funding rounds is a serious responsibility.

Established companies have clearly-defined processes that have been polished over many years of operation. In-house finance teams can build upon the previous year’s budget to forecast future profit and loss. But things move very quickly in a startup, and it can be challenging to maintain a relevant budget that accounts for rapid changes and shifts within a business.

A capable CFO must not only manage numbers, but people as well

Whether the company is embarking on a new round or planning an upcoming IPO, the CFO must cooperate with other C-level executives, financial advisors, and investors to develop the best strategy.

One Singaporean CFO shares that managing investor relations now takes up much of his time. “Before our most recent round, our previous funds were from angel investors [rather than larger companies]. This is faster as the due diligence process is less rigorous, but it also means having to engage constantly with many individuals to keep them updated on the company’s progress.”

The more investors a company adds to its roster, the more unique perspectives, opinions, and personalities a CFO must juggle. Some investors are more passive and don’t require a high touch approach—they’re satisfied with email updates. Other investors want to be more involved with the business and require regular meetings, reports, or calls.

CFOs should be open to asking for help from investors—it’s in their interests to help the business succeed—but they must also learn how to set boundaries and negotiate with investors, many of whom have differing ideas of what is “best” for the company.

3. Aligning tech and finance and mitigating spend proves difficult

A February 2019 Cloudability report found that nearly 60% of organizations overspend on cloud resources. This may be in part to misalignment between tech and finance teams—only 37% of IT respondents said they occasionally overspend on cloud services, compared to 51% of finance respondents.

Nearly 60% of organizations overspend their budget on cloud resources, due in part to mismatched IT and finance perceptions, according to a Cloudability report.

“Poor cloud money management slows or halts cloud adoption (53%), cripples innovation (25%), lowers quality of service (38%), leads to sprawl and under-utilization of resources (40%), and increases costs (22%),” the report found.

The report also found that the IT department is often unaware of the burden cloud budgeting has on finance. CIOs and CFOs need to communicate clearly about their technology investments, which may not always have immediate ROIs.

4. Spending to digitalize outdated finance processes

In April 2018, the National Trades Union Congress hosted a roundtable with the Singapore Accountancy Commission (SAC). Many attendees shared that although new tech has transformed many industries, accounting methods have not yet been similarly upgraded. As a result, many CFOs find themselves struggling to make their outdated processes keep up with blazing fast tech.

New tools like AI and machine learning may make it easier for CFOs to do their job. More companies, for example, are adopting automated spending cards, which instantly track a transaction at the moment it’s made. These spending cards help reduce budget spend by making it possible to set a top-up limit per month or quarter. They also provide much-needed visibility into business expenditures across large teams.

Chief financial officers must take the lead and drive digital tool and cloud infrastructure adoption within their company to stay competitive and relevant. Improved digital literacy among CFOs could answer the issue of low transparency and visibility in finance.

5. Hiring enough capable tech and finance staff

Especially within technology-based startups like fintech and digital wallet companies, finance and tech teams are increasingly working together.

CFOs must make key hires that can lead these teams towards successful cooperation, but unfortunately, good tech and finance talent is often difficult to find in Singapore. According to a survey by recruitment consultancy Robert Half, more than nine in ten (93%) of Singapore’s CFOs state that it’s challenging to source qualified finance professionals.

IMA Chair-Elect Christian Cuzick, VP of finance at Johnson & Johnson and CFO of Johnson & Johnson Vision, shares that he spends “30% to 40% of my time just trying to figure out how to get good talent.”

In particular, finding finance professionals with a knowledge of big data, advanced analytics, cloud-based systems, mobile applications, and predictive AI and machine learning is tough for him. 42% of CFOs currently use these types of technologies, and another 27% expect to adopt them within the next three years.

Financial institutions, banks seeking to go digital, and cashless payments providers have also created a high demand for employees who are familiar with risk, auditing, and financial and client management. Business Times Singapore reports that the most in-demand financial jobs are, in order: credit risk officer, internal auditor (financial services), risk specialist, finance manager, relationship manager, tax manager, internal auditor (commerce and industry), financial analyst, credit controller and accountant.

CFOs need support and guidance as they transition into more strategic roles

Having a supportive backer with resources and belief in the company’s vision can prove incredibly helpful to CFOs (and the rest of the C-suite, of course). Additionally, as Industry 4.0 spreads across the world, it will become more and more important to prioritize digitalization tools and initiatives. These will enable a strapped finance team to spend as much time as possible on strategic direction.

Things seldom turn out the way one predicts in a startup. Building a strong core team of trusted leaders and investors and equipping them with the right tools will help a CFO maximize their—and their company’s—potential.

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