"Within 5 weeks of go-live, we redeployed 60% of our AR headcount costs." — CFO, $200M industrial company
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Now, on to today’s Mailbag.
We’ve got some great topics. Here’s what’s on tap:
Fixing costing errors the right way
Staying the course for a final payout
Untangling a CFO’s authority in a decentralized function
Now, let’s get into it.
Ricky from the US asked:
I was recently hired as an analyst for a manufacturing company. In an industry with thousands of evolving SKUs, diverse jobs, and a large customer base, data capture is a significant challenge.
As I dig deeper into the data, I’m finding that our estimating is fairly accurate on a company-wide basis regarding total costs. However, when analyzing individual aspects of those estimates, we are often wide of the mark, especially for customers with more complex jobs. I’ve identified areas where estimating is particularly poor: we are drastically overestimating some factors by 2x while underestimating others by half. If I implement the necessary corrections, pricing will inevitably rise for some customers and fall for others.
What is a good practice or rollout strategy to avoid shocking our sales team when making these changes?
Oooo, I like this question, Ricky. A good example of why manufacturing finance is so fun.
Before we talk about rollout strategy, I need to ask a clarifying question, because the answer changes materially depending on what type of estimating error you are actually dealing with.
Is this an issue in ‘directly attributable’ costs or not? In other words, is this a debate over absorption rates and allocation assumptions, or can you trace the error directly to a specific product or job?
It matters because they are very different problems.
Absorption rates are semi-fiction at the best of times. Accountant math that approximates reality rather than reflecting it. If your estimating errors live in indirect allocations, the practical impact on pricing decisions is more limited, and I would tread carefully before making sweeping changes. You might create more noise than signal.
But if it is direct costs that are wrong, that is serious, and it must be fixed. Here is why: you have products that are undercosted, so they get underpriced. Because they are underpriced, they sell well. Because they sell well, they grow as a proportion of your mix, and your total direct costs grow in a way that is structurally under-recovered. A mix nightmare that compounds quietly over time, all starting from a broken costing model.
Don't ask me how I know this…
Assuming it is a direct cost estimation problem, here is how I would approach it.
First, look at where the errors are concentrated. If the worst offenders cluster around specific customers, job types, or SKU categories, you can do a targeted fix rather than a company-wide reallocation. That alone reduces the disruption significantly.
Do not approach the salespeople until you have completed that analysis and aligned with leadership. Take it to your VP of Finance or CFO first. Show what is wrong, why it is wrong, and what the corrected model looks like. Get air cover before this goes anywhere near the commercial team, because the downstream consequences are political. Product margins shift, customer profitability rankings change, and individual commission and bonus calculations will likely be affected indirectly.
A hornet’s nest of politics.
With leadership behind you, phase in the changes rather than landing everything at once. Prioritize the biggest errors first, give the sales team time to absorb each wave, and where pricing goes up materially for a customer, give the account owner enough notice to manage that conversation before the new pricing lands. Springing a price increase on a customer without warning is a relationship problem, not just a pricing problem.
You are doing the right work. Just make sure you have the right people behind you before you pull the trigger.
TLDR: Direct costing errors must be fixed. Indirect allocation errors need more thought. Either way, get leadership aligned, target the worst offenders first, and phase the changes so the business can absorb them.
LookingGlass from the US asked:
Hello, thanks for all you do for the CFO and Finance community.
I joined a Series A startup in 2023 as VP of Finance after a 2+ year stint at another startup in the same domain. I joined as the first finance hire and enabled the Series B and C raises ($400m total). I led investor conversations (I have a technical degree), and I built the company model, finance, and accounting team. I also completed the first audit, all the while being the face of the company with investors.
When the step-up to CFO discussion came up in 2024, the CEO said I would be a good fit, and he would talk to the board. Then, in 2025, post-Series C, the same topic came up. The CEO said he was going to push for the change in 2026 Q1.
The CEO has now changed his tune and says the board wants a full process and potentially a public company-experienced CFO.
I feel let down. I’ve turned down other CFO inbound roles over the last three years.
I have about 0.3% equity in a $4b valuation startup with one year to full vesting.
What are your thoughts on whether to jump ship, wait it out, or learn from a new CFO (I have never been one)? I am getting older (50+) and don’t feel like I have the luxury of time.
LookingGlass, let me just play the facts back to you.
You joined as the first finance hire three years ago. You have acted as de facto CFO throughout, built the function from scratch, raised $400m, and helped build a business to a $4b valuation?
You are a f*cking rockstar. Well done.
Now, the situation…
It sounds like you are on the ramp to IPO, and the board has decided they want a CFO with public company experience in the seat for that journey. I understand the logic, even if the execution has been poor. Your CEO has strung you along for the better part of two years with promises he either could not keep or was not straight enough to qualify properly.
That is not nothing, and you are entitled to feel let down.
But let's separate the emotion from the math. You have 0.3% equity in a $4b business with twelve months to full vesting. So if I’ve understood you right, you’ve got about $9m vested of a total $12m.
You have turned down CFO roles to get here. The question for you is not really whether you were treated fairly, but whether walking away now makes sense.
First up, remember that $4b is paper until an exit actually happens, so I’m making the assumption that you are comfortable with that valuation.
But on that basis… vest the full bag. See the IPO ramp up close, because that education alone is worth something. And then leave with your equity intact, your reputation immaculate, and zero obligations to anyone.
You could have a direct conversation with the CEO about what the next twelve months look like for you. Are you a genuine number two through the IPO, or being quietly managed out?
But weigh it carefully, don’t upset the apple cart if you’ve got $3m on the line. Only you can judge whether the relationship can hold that conversation cleanly.
On learning from the incoming CFO: approach it with curiosity rather than resentment if you can. Public company CFO experience is one thing your resume does not yet have. Watching someone navigate that transition from the inside, even from one step below, is genuinely valuable preparation for your next role.
At 50-plus, you are not short of time. You are short of patience! The CFO market will receive you extremely well on the other side of this, particularly in your industry.
Vest. Watch. Leave on your terms.
Write back in twelve months and let me know what’s changed, and we can go around this again then.
TLDR: You have been messed around, but the math says stay. Vest the full bag, learn from the incoming CFO, and leave on your own terms with $12m and an IPO on your resume.
ConstructionCFO from the Netherlands asked:
You recently gave useful insights into your vision on centralization vs. decentralization.
I've been working as a CFO for a family-owned construction company with three branches for a couple of months. The company prides itself on decentralization, with only a centralized AP and HR admin function. Otherwise, everything is handled in the branches and reported to the local MD, including the local finance function.
But the branches don't have visibility on each other's projects, prospects, financials, headcount, etc. Everything is shielded like it's a state secret.
Because of this, I find it very hard to work with the local finance heads, as it's difficult to discuss topics and become very specific. Also, when they don't like where a discussion is going, they subtly - or unsubtly - remind me that they report into their MD.
I don't want to escalate every discussion through our CEO and the local MDs, but I have found it necessary on topics I feel strongly about.
What is your take on this?
This is a common issue, ConstructionCFO, and I imagine it is particularly difficult to deal with in the Netherlands, where people tend to be biased toward, let's just say… the strong-willed end of the personality spectrum.
Let me separate the two things, because they are different problems.
The first is decentralization itself. That in itself isn’t necessarily a problem - you have read my views on that before. Decisions made closer to the work are often more customer / operation-centric decisions, and the construction industry in particular rewards local knowledge and relationships. So I am not going to tell you the model is wrong.
But the real issue here is transparency, and here I have zero tolerance. Decentralization without visibility to the center is not decentralization. It is fragmentation. There is a legitimate debate about how much the branches should see of each other. There are pros and cons to that kind of horizontal information sharing. But between the branches and you, as group CFO, there should be no walls at all. Full stop.
You cannot consolidate, you cannot manage group risk, you cannot advise the CEO, and you cannot do your job if local finance heads can shut down a conversation by reminding you who they report to.
And that reporting line is part of the problem. If local finance heads have no dotted line to you, information access alone will not fix this. You need some form of functional authority over the finance community across the group, otherwise every difficult conversation will end the same way it does now. With a reminder that they report to the MD, not to you.
So here is how I would handle it.
You are a few months in, which gives you a useful tool. Use the natural moment of a 90-day review or an onboarding conversation with the CEO to surface this directly. Not as a complaint, but as a structural point. Something like, "You brought me in to do a job. I cannot do that job without full access to information and a clear functional relationship with the local finance teams. At the moment I don't have either, and I need your support to change it."
That conversation needs to happen with the CEO, not the MDs. This is above their pay grade to resolve, and going to the CEO is not a failure on your part. You are not asking them to dismantle the operating model. You are asking for the basic access and authority any group CFO needs to function.
And if the CEO is not prepared to give you that? Then you have learned something very important about the role you have walked into. For me, information access is not a negotiating point as a CFO. It is a resignation point if it comes to it.
TLDR: Decentralization is fine. Decentralization that keeps the group CFO in the dark is not. Get the CEO to back you on access and reporting lines, and be prepared to make it a line in the sand.
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.
CEOs are feeling vulnerable because CFOs talk to the Board…?! This is always a delicate line - but it’s important your CEO accepts you have dual reporting lines, both into them as CEO and into the board. It’s good governance.
Sam Altman is pushing an IPO for OpenAI … but it sounds like CFO Sarah Friar doesn’t think the model stacks up. As a result Altman is holding investor meetings without her.
I think Friar has been slow to stand her ground inside OpenAI, but its good to see she’s finally making up for lost time.
While this CFO is in trouble for allegedly diverting Dell products to China, there must be some in the customer onboarding and sales teams at Dell sitting in the time out box too.
This is an interesting demonstration of how convincing deepfakes have become and one way to spot them!
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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.
