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You might reasonably ask what I know about building a finance function at the very earliest stage, where founders dominate everything. After all, most of my career has been spent inside big companies, running finance teams with hundreds of people.

It’s a fair question. Building from zero is a very different challenge. No specialist tax team, no systems experts, no FP&A analysts on hand.

But I’ve inherited plenty of finance functions where later maturity was harder to achieve because of the decisions made right at the start. I also have a handful of investments in small businesses, who are very much stuck at first base.

But most of all, my own content business, is living this challenge in real time. What began as a Twitter account has become a real company, with invoices, sponsors, costs, and a growth plan.

I have huge ambitions for what this will become, and I’m making some big investments to make it happen. I’m on a mission to create the ultimate resource for CFOs. That brings plenty of challenges, and one of them is making sure the finance operations are fit for growth as I start building a team and developing new revenue streams.

It can’t depend on me - I need to spend my time creating content for you.

Which brings us to this month’s Playbook…

Last week, we laid out the three components of the Secret CFO Finance Maturity Framework (FMF):

This week, we’ll bring that model to life by exploring the first step in developing a finance function: moving from a business where the founder makes every decision to sowing the seeds of the first finance function.

At this stage, the finances run in a state of manageable chaos around an omnipresent founder.

The scope of “finance” is limited almost entirely to financial operations, the inward part of the four core activities.

That’s not to say these operations don’t work. In fact, they often do. They’re just highly manual and entirely founder-reliant. A business can reach a decent scale this way. As transaction volume grows, some of the work gets pushed out to a bookkeeper or absorbed by a general admin with good attention to detail but no finance specialism.

The founder still retains absolute control, signing off on every payment, often making the payments themselves. They might have help chasing invoices, but it’s usually the founder who notices something is overdue and gives it energy.

I use the word founder, but really, this means any single dominant decision-maker for whom managing the finances is only one part of the job. Founder is just the simplest label.

There might be some basic backward-looking reporting, usually a simple monthly pack produced by a bookkeeping firm. But the business is fundamentally run off the bank account, which is the only real source of truth.

There is no formal forward-looking FP&A or outward-looking strategic finance, but that doesn’t mean it doesn’t exist. There is a kind of founder FP&A. A patchwork of handwritten notes and half-finished spreadsheets that work out pricing, gross margins, and key business drivers.

There is also a bit of selection bias here. Founders who do not do this bit well often do not make it this far. They either run out of money or fail to grow because they do not understand their own numbers. Or don‘t get paid on time.

The ones who reach this stage, where finance starts to creak, are the ones who have built a business on solid enough fundamentals to have some first-world problems.

The manual stage works in the early days because:

For some businesses, there’s never any real intention to move beyond this. And they might be right. For a founder who wants to stay lean, with a simple model and limited ambition to scale, this setup can work indefinitely, delivering a lifestyle business generating hundreds of thousands or even a few million in profit.

All they may ever need is a general admin to handle transactions and an outsourced CPA to stay compliant and on the right side of the IRS at year-end.

Modern SaaS tools have made this stage far more sustainable for longer. Expense management platforms like Brex simplify spend control, while payroll tools (Rippling, Deel, Gusto, etc.) make hiring and paying people almost frictionless.

These tools help raise the bar for how long a business can stay in its “Manual” era (which in fact starts to look a lot less manual), while also building the muscles that will matter later. Many of these tools can scale seamlessly into more mature stages.

So how do you know when it’s time to move out of the manual setup and onto the next stage? This is one of the hardest calls to make. From the outside, a manual setup often looks chaotic and disorganized, but so does any early-stage business.

So the real question is: how do you tell the difference between a kitchen that is just mid-service from one that’s on fire?

And to what extent are you truly outgrowing the manual stage, versus just not executing the stage you’re in very well?

Here are some signs to look for:

And the issues won’t be limited to finance. If the business is creaking under the weight of the founder’s bandwidth in finance, it’s probably happening in sales, ops, or product too. Spotting these bottlenecks - and unlocking them with smart platform or hiring decisions - is one of the most important skills a founder can develop.

It’s another form of selection bias. Sometimes a business stays “manual” forever not because of finance, but because the founder is stuck behind a bottleneck elsewhere.

I saw this firsthand in an SMB I acquired a few years back. The two owners were each spending half their time on finance - basic tasks like billing, chasing debt, and making payments. They were control freaks, but they hadn’t realized two things:

After the acquisition, we bundled all the accounting and finance work and handed it to an outsourced specialist. What had taken the founders 40 hours a week was cut down to 10 hours of cleaner, more automated work. That freed us up to hire a single general manager, focused entirely on running and growing the business.

It was a simple maturity step they should’ve taken years earlier. It probably cost them at least 1x EBITDA in enterprise value at exit. Still … I’m not complaining.

When the business starts to feel these pain points and the founder decides they are ready to invest in some help, it’s usually a sign they’re ready to move into the Managed stage of maturity.

There are plenty of ways to survive in the chaos of the Manual stage for a while, but any credible business eventually needs to grow up into the Managed stage, the second phase of finance maturity.

I’m reluctant to put a strict revenue or headcount level on this, as it could vary wildly. But if you forced me … I would expect the median breakpoint to be somewhere in the $1-$3m revenue mark.

It’s in the Managed stage that something resembling a real finance function starts to form. Like a small turtle hatching from its shell and making its way down the beach:

This transition is about building a Minimum Viable Finance Function. The smallest setup that brings order without slowing the business down.

Let’s define the MVFF in the context of the 4 core activities of finance:

There might be other things important to your business at this stage, but this checklist is what I’d expect as a minimum to say you’ve grown beyond the Manual stage.

And how you sequence these things will depend on your business and industry. Your MVFF build path will vary based on business model. For example, SaaS will over-index on revenue and billing controls early. DTC will need inventory and spend discipline faster.

As we said last week, moving from one stage of maturity to the next doesn’t just happen. It’s not like flipping a switch. It’s more like pushing a boulder uphill. To do that, you need muscles. Big bulging ones.

Last week, we saw that the limiting factor for moving up the finance maturity curve is the three muscles you need to build along the way: People, Tools, & Data.

The People Muscle

Stage 2 of finance maturity is defined by a small team of finance generalists. You don’t yet have the scale or maturity to divide finance into specialist sub-functions like Controlling or FP&A.

So, which generalists? More specifically, who should be your first hire?

That depends on your situation. And it’s a tough question to answer. Often founders set an arbitrary budget for how much they are prepared to spend then find the best full time hire they can for that rate.

That works in a VC-backed startup where building for scale is implicit in the budgets and funding rounds. So a full time Head of Finance could make sense as the first proper finance hire. Someone experienced enough to wear multiple hats, and see the business through this stage, and maybe even the next 1 or 2 if they can grow fast enough.

But in a bootstrapped business where the budget is constrained at this stage, that probably isn’t right. You risk hiring a finance specialist pretending to be a generalist. Or just someone without the experience and bandwidth to answer the important questions.

That’s why my preferred model at this stage (assuming budget limitation) is a Fractional CFO (fCFO). Ideally, one with experience in your specific sector and enough breadth to design and build your MVFF.

They’ll know what’s needed, how to prioritize, and where to start. Great generalist fCFOs are extremely valuable. Their specialisms are your stage of development and your industry. But they can tackle problems across the entire finance stack (month end close, FP&A, managing banks, unit economics and pricing, strategic planning, etc)

The challenge? Anyone can call themselves a Fractional CFO. There are some excellent operators in this space, but there are also plenty of grifters with little more than an Excel license and a dream.

You’re looking for someone who’s built MVFFs before in your sector and can prove it with client references.

They do exist, you just have to look a bit deeper.

Typically, they’ll also need to start scaling a team underneath them as your volume grows: maybe a bookkeeper and a transactional processor. Get the right person, and they’ll take care of that for you.

But once there is enough scale to full time finance heads, even junior ones, you want try and bring them onto your staff. You don’t want your Fractional CFO to take your whole finance function and outsource it. You want their help building the finance people muscle inside your business.

Having those full time heads inside your business will pay off at later stages, and derisk you in the short term. That way when you are ready to move from fractional CFO to full time, the step will be more organic (more on that next week.)

The right leader to build your finance team around will also know how to work with the founder. They will still have an important role to play in review, engagement, and escalation.

And yes … I’ll be looking for a fractional CFO who is a savage in the media business myself before too long…

The Tools Muscle

At this stage, you’re seeing the first real emergence of process.

The decisions you make now about which tools to use matter a lot. They can be replaced later, but the deeper you go, the harder it gets.

The most obvious tool choice you make at Stage 2 is your accounting software. And that’s a whole topic in its own right (for another day.)

But there’s an even more important decision than what system you pick: the chart of accounts (COA) you build on.

The chart of accounts is the structure that defines how every transaction in your business gets recorded:

… and hundreds of other similar decisions.

The story of how most early-stage businesses end up with theirs usually goes something like this…

Your CPA sets up QuickBooks, Xero, or something similar to get you through your first annual reports and tax filings. They use an off-the-shelf template or copy it from a client who looks a bit like you. And you’re stuck with that COA forever.

That’s the process. And it’s wrong.

The COA is one of the most important foundations of a finance function. Get it right, and reporting and insight become effortless. Get it wrong, and you’ve signed the business up to a life sentence of manual spreadsheet cranking for the next ten years.

Your COA should be designed by someone who truly understands your business and how it makes money. It’s one of the best litmus tests for a good bookkeeper or Fractional CFO. The good ones care deeply about this. It’s one of the first things they’ll ask about when they onboard you, and they’ll engage you in getting it right. And if they already know your industry, they’ll know the answer to 95% of the questions already.

The bad ones won’t. They’ll just impose a template that makes their tax filings easier, not your business smarter. Tax filings are once-a-year events. Reporting using your COA is something you’ll do every single day (eventually).

A good COA reflects how your business generates value. It links revenue to the right cost drivers and classifies spend by behavior, not convenience. If you get one thing right at this stage, make it this. It’s hard to think of anything that creates more downstream work if you get it wrong.

And sure, it takes a bit of thinking, but it’s easier to define a COA now than when you have a finance team of 10 already using it.

Alongside the COA, this is also the right time to be building basic internal controls (ones that extend beyond the founder signing everything off). Here’s an example of some ‘must-have’ controls at the MVFF stage:

Beyond that, keep your processes lightweight: a one-page checklist for month-end close, a clean billing process, a basic PO, and approval workflow. Even better if they’re codified in your accounting system or a lightweight dedicated tool for managing costs, expenses, payroll, etc.

The Data Muscle

The problem with data is this… the more you have, the more people you need to make sense of it.

And that’s not what this stage is about.

For most businesses, the priority should be to focus on a few clean, reliable data flows that integrate well.

Make sure your purchase order process maps cleanly into the general ledger, bringing useful metadata with it. The same goes for billing and payroll. The goal is to make your core transaction flows post seamlessly into your GL.

The explosion of SaaS tools with strong APIs means you can integrate best-in-class dedicated workflow tools and still have them flow cleanly into your GL. If you are maturing from Manual (Stage 1) to Managed (Stage 2) right now, you have the advantage of adopting these tools now. Your more mature competitors may not have had the option when they were at the same stage 10 years ago. Take advantage.

You may have some specialist data needs at this stage, but resist the temptation to overbuild. Focus on doing a small number of things really well.

Trying to integrate and automate everything too early will only stretch your limited resources and pull you off course. Automating the wrong thing is like putting a turd in a washing machine. You’ll be cleaning up after it forever.

To wrap up, here are some common traps to avoid as you shift from founder-dominated finance to an emerging team of finance generalists:

The decisions you make as you escape the chaos of founder-controlled finance and move into the early rhythm of a finance team matter more than they might seem. The foundations you lay now will shape everything that follows.

And for the next stage of finance maturity, you’ll move from a small team of finance generalists to a team of specialized finance professionals. That’s where we’ll head next week.

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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.