Finance insights 9 min read

Head of Finance: the role & responsibilities in high-growth startups

Joyce Mackenzie Liu

High-growth startups thrive on data-driven decision making. This is both a practice and an attitude, and usually comes from leadership. And since finance is typically at the heart of this data, startups must invest in financial leadership early - especially in high growth companies. 

To make smart cash management and growth decisions, it all starts with sound bookkeeping and accounting. These give you quality data on costs and expenditures, and also better visibility into revenue. Plus, good accounting ensures you’re compliant on tax and regulatory requirements, which can obviously hurt growth if you get them wrong.

All of this is made possible with a good Head of Finance. As we’ll explore, I believe that ambitious companies should hire a Head of Finance early - ideally before their Series A. But we’ll get to that shortly.

There’s a lot of confusion around different finance job titles and responsibilities, so this article sets out who your Head of Finance should be, and why they’re so critical for growth.

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Head of Finance vs Financial Controller 

Typically Heads of Control (or Financial Controllers) give visibility into costs and cash, or simply money flowing in and out of business in any given time period. The Head of Finance, on the other hand, has a more strategic, proactive approach. 

It’s common to see the Head of Finance also hold a financial control role in business - they might even be “Head of Finance and Control.” And in order to add value in a high growth environment, this individual needs to have a good balance between the analytics and the pragmatism that's required in a high growth environment.

But keeping the two roles separate, the Controller should be very good at implementing processes and systems. These should particularly ensure control over costs and cash.

The Head of Finance also has a commercial mindset. So they're thinking about not only management of risk for the business and financing, but also how the business is able to drive revenue. And that’s probably the key differentiator between a Controller and a Head of Finance.

Your Head of Finance will even think about pricing and packaging strategy. They need to understand the different mechanics of marketing, sales, product development, and start thinking about the implications of capacity planning and resource allocation. 

Costs and cash for the Head of Finance

Even if the Financial Controller is the technical expert, a Head of Finance still needs a deep understanding of both costs and cash for the business.

Costs

The Head of Finance needs to be keenly aware of company costs, but not in the line item by line item sense that a Controller or Lead Accountant does. Ultimately it requires a very good understanding of a few key numbers: 

  • Cost of sales - or “cost to deliver” a solution. This lets you measure your gross margin.
  • Cost of customer acquisition (CAC), which is ultimately a mixture of marketing, sales and customer success. 
  • Cost of build - your R&D and product development. 

Without these fundamentals, the SaaS metrics that you'll put together down the road will be worthless. Garbage in, garbage out

You need to be able to trust the numbers, and trust the processes and people behind the numbers. That’s the only way to drive good business decisions.

Cash

One key responsibility is to give visibility over cash flow to senior leadership. So how can a Head of Finance give more or better visibility over cash?

It comes down to understanding concepts like working capital and operating leverage. And this is what separates the Head of Finance who’ll soon grow into a VP of Finance role from those who will remain in the “Head of” position. To progress, you need not only a commercial mindset beyond accounting, but equally the basics of a financier or banker’s mindset - which is how to predict and drive business visibility, which influences company value

Your operating leverage is a function of your gross margin, and also impacts CAC and payback period. A talented Head of Finance knows how to optimize the relationship between when you get paid by customers, and when you pay your suppliers and staff.

Cash flow management is that dynamic between cash coming in and going out of the business - which operate on distinct timelines.  

In a lot of cases, you pay out faster than you get paid since a high growth business is hiring and ramping up new hires at an incredibly fast pace in order to achieve the future plan. And it is vital that you pay staff on time and keep the lights on. Especially in scaleups and growth stage companies, your customers won’t become profitable for months - even years. 

The best Heads of Finance look to tools like short-term venture debt or inventory financing to bridge this gap. You can easily keep operating cash on hand without giving up equity and diluting shareholders, and you can do this quickly. 

Common variations on the Head of Finance role

A simple job title is never really that simple. There are several tweaks to the classic Head of Finance role, widening the scope and incorporating other disciplines. Here are a few to be aware of. 

Head of Finance and Accounting 

Typically, this Head of Finance and Control is a qualified accountant with three to five years of post-qualification work experience. They need to know SaaS accounting standards and specifically ASC 606 requirements, which are a requirement when reporting under IFRS. This is a necessary requirement for US public companies since late 2017, and for private companies since late 2019.

Per Accounting Today, "ASC 606 is the biggest change to the accounting standards in the last 100 years". This is why the Head of Finance job is so critical.

These standards and their implications are becoming increasingly important in the UK and Europe since all technology companies are now global by nature. They change how you produce and recognize revenue, how you determine costs, and how you accrue these for the business. Which then directly impacts SaaS metrics like ARR, gross margin, CAC, CAC payback, gross retention, and net retention.

Someone in a hybrid Head of Finance and Accounting role either needs to know these or be able to learn it very quickly. 

Head of Finance and Operations 

A Head of Finance and Operations should be results-oriented. They also need to ensure a tangible value in delivering quick results. It also typically requires someone that can be hands-on and manage multiple projects, with a proven ability to do that in a complex operational environment. 

Any Head of Finance should work closely with operations - especially revenue operations. To combine these focal points, you need the skill set to also work in revenue and customer software systems like your CRM, subscription management, data warehouse and business intelligence & visualisation solutions

They are really there to make sure that there is a check and balance in the business when it comes to expenditure. They're the one that's holding marketing, sales, and product accountable for spend and resulting growth. 

Naturally, they also implement finance tools associated with accounting, invoicing, billing, and expense management.

Head of Finance vs Rev Ops 

This isn’t so much a hybrid role as two distinct needs that work closely together. 

Revenue Operations (“RevOps”) is really about having data integrity and fast, easy access to key business insights by creating systems around the people and processes that govern data input and transform them into valuable intelligence. The Head or VP of Finance needs to derive insights of already-transformed data to then influence decision-making across the business on go-to market, hiring, competition, and fundraising. 

RevOps works in the systems. They work in your CRM, subscription management, data warehouse and business intelligence & visualisation solutions. And when you need them depends on your operational complexity. 

As you acquire more customers with different types of billing cycles, you may need dedicated revenue operations. RevOps is there to ensure data integrity. You need good data quality delivered to finance, which then lets you extract it and make smarter choices. As complexity grows, that data can become harder to trust unless it’s managed closely. 

In essence, great revenue operations create a single source of truth that then fuels the rest of the business. It ensures you have one definition for marketing qualified leads, sales qualified opportunities, sales qualified opportunities, and so on. And it ensures consistent data on this, so you can quickly build financial reports and communicate business intelligence with credibility. 

It’s very challenging to scale a high growth business beyond $5M ARR and 100+ customer accounts without a dedicated RevOps SaaS specialist in place.

The Head of Finance is there to ensure that there are processes in place that track the data coming in - particularly as it relates to cost and cash. And then of course to produce reports, set cadence, and make recommendations well in advance of the next Board meeting or fundraising round.

Head of Finance vs Finance Director (or VP of Finance)

This distinction is particularly interesting for many people. The Head of Finance has the potential to grow into a Finance Director - as it's called in the old world - or VP of Finance in a high growth environment. In a scaleup, Finance Director and VP of Finance are often used interchangeably. 

The distinction between these two roles is really the ability of someone to drive revenue visibility. A Finance Director or VP of Finance knows how to influence revenue visibility and predictability across the company. And what distinguishes them from a Head of Finance is the amount of experience with a particular type of business model.

For instance, for a SaaS company, an ideal VP of Finance would have supported a business through one or two funding rounds and perhaps even a company exit under the guidance of a CFO. They're well-versed in Salesforce, HubSpot, and maybe even Pipedrive

They should know how to integrate subscription management solutions like Chargebee with core accounting systems such as Xero or Quickbooks. And they're able to think about global businesses with customers and people spread across many countries.

They should know how to deal with multiple currencies and operating subsidiaries, and have led the selection and implementation process of ERP solutions like NetSuite which become necessary for a business when consolidated reporting becomes challenging.

These systems and processes are critical to producing accurate unit economics which inform a business of their scaling success. And ultimately, being a strong business partner means being able to communicate and enable change that drive strategy with supporting numbers.

This includes knowing who to hire, when and how to compensate and retain appropriately. A great Finance Director or VP of Finance can do this in a data-centric manner. 

It’s also a mindset. They're in this constant execution, delivery mode that propels the business forward, fast and with precision. 

Head of Finance vs CFO

The CFO is an experienced VP of Finance or Finance Director who knows how to communicate and impact investment and funding decisions - inside the business and outside with the financial capital markets. 

The leader focused on day-to-day operational excellence is your Head of Finance and Revenue Operations. The VP of Finance is responsible for future growth planning and forecasting, making sure it is deeply integrated up to strategy and down to operations.

The CFO exists to impact business strategy. This includes product, go-to-market, hiring and funding. 

Key topics of focus are: How do you optimize flexibility versus cost of capital for a business? How do you communicate inside the company, and also with your Board and the broader financial markets on how leadership is creating value? 

The solid CFO provides all shareholders with the trust and confidence that a business is performing and growing in the right direction. 

How to construct your financial leadership team

So in summary, each of these professionals have a core set of expertise, which they're really, really good at. And they naturally complement each other. In a high growth scaleup, it is extremely rare that one individual holds the entire ‘toolkit’ and has enough time to use all of those skills.

The key is to have the data you need - data you can trust - to make the right business decisions. And the right person to interpret that data and make informed recommendations

For the Head of Finance role in particular, especially for ambitious, high-growth companies, you need that person before a Series A funding round. The business could be somewhere between 15-20 people. If you have 50 people and don't have a Head of Finance in place, that probably means you are driving blind with no clear sense of direction.

A VP of Finance is a leader you should have in place around a Series B funding round. And an experienced CFO typically joins only after Series C or pre-IPO. Of course, these roles can be filled by interim or outsourced CFOs for a period of time. 

The alternative is building a “Finance pod” early on - just like in Sales or Product. This gives you confidence that you're continuously de-risking and on the right growth path at the same time. Having a Head of Finance, RevOps, VP of Finance and CFO together ensures an environment of structured chaos necessary for high levels of experimentation and successful growth. 

This is how you drive revenue growth while maintaining appropriate cash burn.

With the right finance roles working in multiple parallel streams, the needs of your customers, people, and investors are deeply integrated and satisfied.

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Joyce Mackenzie Liu

Joyce Mackenzie Liu is Founder of Pegafund, a business providing strategic growth CFO ‘as a service’ for European B2B software startups ranging from 20 to 100 employees in size. The company supports the enablement of predictable growth and global go-to market success. Previously, Joyce was an advisor, investor, and board member of European and US B2B software companies as part of Columbia Lake Partners (London), Dawn Capital (London), Ares Capital (Los Angeles), and JP Morgan (New York).