📬 Breaking Bad News: When, who, and how to handle it

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We’ve got some great topics today. Here’s what’s on tap:

Now, let’s get into it.

Loubi from Paris asked:

I recently joined an SMB that only does quarterly closings. Having previously been used to monthly closings, I'm unsure how to approach this. Could you please give me some guidance on how to address this with my CFO and help the company evolve in the right direction, if needed, without creating conflict with my manager, who keeps telling me that our finance team isn't staffed enough to handle monthly closings or MBRs?

Thanks a lot!

Thanks for the question, Loubi.

This is not uncommon. Plenty of small businesses get by just with quarterly closes, assuming they’ve got solid daily or weekly KPI tracking in place.

So, first question: what’s the actual business value of a monthly close here? What would it deliver that the existing weekly monitoring doesn’t deliver. If the answer isn’t obvious, you're going to get nowhere trying to sell it internally.

And don’t just accept “we don’t have the resources” as a hard stop. That’s not a reason, that’s a constraint. If you're used to monthly closes, you probably know which parts of the close process are bloated. Start there. Look at what’s taking up the time. What’s being done manually that doesn’t need to be? What’s being double-touched?

So here’s the play: get automating. Automate the hell out of your quarter-end close. Shorten it. Streamline it. Make it boring. If you can cut the time and effort needed for a quarterly, you make the move to monthly a much easier sell. Your CFO is more likely to greenlight monthly if it doesn’t tie the team up for two weeks every four.

One last thing: you’ve just joined the business. And already you're running into a fundamentally different view of what good finance looks like. That’s not a resourcing issue, that’s a philosophical difference.

And it’s worth reflecting on.

These are the kind of misalignments that need to be surfaced before you sign the offer. Interviews go both ways. You're not just there to prove you can do the job. You're figuring out whether their version of the job is one you want to do.

Hope that helps.

Farnsworth from Atlanta asked:

Mr Secret CFO,

Our job is filled with the need to deliver unpleasant news, and I think your audience could benefit from a construct to use. Some of the questions are:

1. When should I deliver the bad news? Should I deliver when I think I see or know something, or wait for confirmation? The former has worked better for me over time, but the downside is that the typical questions have no answers.

2. Who should be told first? The CEO or others who may be involved? If you tell others, the CEO may hear about it before you are able to tell him/her. If you tell the CEO first, then, well...

3. At what point do we assign accountability, and to whom? Sometimes it can come across as a blame game, and how do we avoid that?

4. And, most importantly, what is the best way to start the conversation?

This is a great question, Farnsworth.

One that every CFO has to find their own way of answering. There is no one-size-fits-all blueprint. But there are some frameworks we can draw out. Let’s give it a shot.

Timing

As a general rule, deliver bad news early. But not prematurely. It needs to be real, not just a gut feel. Real doesn’t mean 100% confirmed. It means you've applied judgment, and there’s enough substance to justify the conversation. You’ve verified.

So if you’re 20% confident you’re going to default on a covenant next quarter, that’s bad news. Share it now. But if you’re guessing based on a vague hunch or single datapoint, sit tight and go gather more.

Never be the one who cries wolf. But never be the one who hides the wolf until it’s eating the sheep either…

Who to Tell

Start by asking: “Whose news is this?” Because finance often spots issues that originate elsewhere:

These are all issues that finance might discover, but that doesn’t mean it’s your news to share.

In these cases, I prefer to go to the responsible exec first. Give them the chance to take it up the chain. It’s not about finger-pointing, it’s about giving them the opportunity to own the message. But that window needs a clock. I’ll usually frame it as: “This needs to get in front of the CEO within 48 hours. I think it would be better if it came from you, but I’m happy to do it if you prefer.”

That’s the fair way to do it. And if they stall or waffle, you’ve still protected the company and yourself.

Accountability

This is where most people screw up. You’re not there to assign blame. You’re there to protect the business.

So when you raise bad news, focus first on clarity: What happened? How big is the problem? What’s the impact? Don’t editorialize, and don’t speculate. Just put the facts on the table.

Once the dust settles and the facts are accepted, then comes accountability. What failed? Who owns that domain? What changes will there be going forward? You don't need to make it personal, but you do need to make it clear.

Starting the Conversation

If it’s you who has to deliver the news, treat it like pulling off a Band-Aid. Cut the long preamble. Here’s an example:

“I need to bring you up to speed on something. It’s not good news. Last month, we overstated profit by $1M in our internal reporting. We are going to have to restate in our next set of books. Let me explain how it happened, and why it won’t happen again…”

Good luck, Farnsworth… go rip the Band-Aid.

Miles Profit from Australia asked:

A few weeks ago, you wrote:

"Let’s start with the core truth. The purpose of investment is to turn one dollar today into multiple dollars tomorrow. If your aggressive investment isn’t doing that reliably, efficiently, and repeatably, then it becomes irresponsible, regardless of how much capital you have access to."

In my role as CFO of a ~$25M revenue business, I often grapple with the tension between investing for growth and ensuring we’re operationally equipped to deliver on the client side. Our model relies on matching incoming clients with a constrained supply of opportunities - and if we fail to service them effectively, we risk refunds, churn, and reputational damage.

This means we sometimes need to invest in capabilities or overhead that aren’t directly revenue-generating but are critical to preserving client outcomes and long-term unit economics.

So, my question is:

How do you think about investing in functions that aren’t directly linked to revenue but are necessary to safeguard the customer journey and protect downstream value?

Is there a framework or lens you use to evaluate those kinds of decisions - especially when there’s a risk of over-capitalising too early or under-investing and eroding trust?

Thanks for the question, Miles.

I think you’re describing fixed cost or overhead for a middle office function. Something that doesn’t directly generate revenue or make a product but is still essential to service delivery.

Not every cost can be directly attributed to a unit. And not every cost can be described as an investment.

So the way I think about it is this: every dollar out the door is either a cost of delivering my Maintainable Free Cash Flow (MFCF), or it’s an investment in growing that MFCF in the future.

If it’s the former, your job is to make sure you’re converting revenue into cash at the best margin possible, without sacrificing customer service or product quality.

If it’s the latter, your job is to allocate capital into areas where you believe, reliably, efficiently, and repeatably, it will grow MFCF in future periods.

Now, where it gets blurry is the kind of cost you’re describing. Internal infrastructure, customer service capacity, or capability that doesn’t directly earn revenue, but absolutely protects it. In other words, it preserves retention, margin, and customer trust.

Here’s the key: if your current level of overhead isn’t enough to protect product delivery or customer outcomes at your current level of volume, then one of two things will happen:

Either way, the current level of profit won’t hold.

So yes, you need to keep every function that doesn’t directly touch the customer or product as lean as possible. But never so lean that it risks the service standard at established volume levels. That’s a false economy.

This becomes harder when demand and supply are volatile, which it sounds like they are in your case. That means you need to build your cost structure around a sustainable base, the level of recurring activity you can confidently plan for. That base is where you anchor fixed overhead.

Then you think about flux, the peaks. And how you serve them. That might mean carrying some inefficiency, or it might mean building flexible capacity. There’s no perfect answer. But it’s about designing for volatility, not pretending it doesn’t exist.

The trick is to continually rebalance. As volume grows, that sustainable base gets higher. You can re-establish a new baseline and right-size your overhead again.

But don’t get confused between building out capacity for scale versus protecting what you’ve already sold. The first is investment. The second is just a cost of doing business.

Hope that helps.

A few of the biggest stories that every CFO is paying close attention to. This is the section you might not want to see your name in.

Per CFO John Rettig… “The impact and influence of the CFO have broadened dramatically compared to 25 years ago.” No kidding.

It’s been interesting to watch some F500 companies formally merging the CFO & COO roles into a COFO. I expect to see more of this.

Funny timing, I just discussed this very same concept last week.

Colette Kress joins the Tres Commas Club. Very nice.

Tech CFO net worth is exploding, and the market is feeling it.

Retention is getting tricky. Young CFOs are on the rise. And keeping top notch talent is getting tough: “CFOs at publicly traded companies are currently the youngest they have been in six years and have the highest turnover rate in the same timeframe.”

Either way, good news: the billionaire CFO isn’t a pipe dream anymore.

Today in “jobs you couldn’t pay me enough for,” Wayne DeVeydt is taking over as CFO of UnitedHealth Group. Not only is there the obvious red flag (fear of bodily harm), but UnitedHealth is spiraling.

The company just slashed its guidance, brought back its old CEO, and is in the Department of Justice’s crosshairs after prosecutors opened an investigation into its Medicare practices.

Good luck to Wayne, this is as tough as CFO roles come.

ICYMI, here are some of my favorite finance/business social media posts from this week. In the words of Kendall Roy, “all bangers, all the time.”:

It’s looking dry out there…

Let me know what you thought of today’s Mailbag. Just hit reply… I read every message.

On Saturday, we discussed why the college-level definition of “capital structure” is failing CFOs. If you’re asking “debt or equity?” then you’re asking the wrong question.

Check it out now

Disclaimer: I am not your accountant, tax advisor, lawyer, CFO, director, or friend. Well, maybe I’m your friend, but I am not any of those other things. Everything I publish represents my opinions only, not advice. Running the finances for a company is serious business, and you should take the proper advice you need.