📬 Tone at the top: Dealing with a CEO who fiddles their expenses

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Now, on to today’s Mailbag.

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

Now, let’s get into it.

Early Stage CFO from the US asked:

I'm the CFO of a growing startup and have been on the finance side of startups for my whole career.

The company is doing reasonably well, but is burning more cash than necessary while not growing as fast as we'd like.

I have a good relationship with the CEO, and I am one of the few people on the exec team who is not afraid to disagree with him openly (and he even listens some of the time ;) ), but something he does that drives me crazy is frivolous spending. He always finds a "business" reason to pay for his personal travel, like flying to a customer and then flying to his vacation, and then back to a customer to be able to expense trips/food/alcohol.

We have an expense policy forbidding this stuff and most other things like purchasing alcohol or expensive meals, but he does it anyway. I've pretty much written him off as a lost cause, but this behavior gets seen by other people in the company and has led to people trying to get away with stuff like alcohol purchases, room upgrades, first class flights.

I've brought up issues with our sales team sending too many people to customer visits and he can always justify it as trying to move the needle on revenue. Even though I know that these visits are often unorganized and overstaffed because our team is afraid to be caught off guard and not have everyone there, which can be solved by being prepared and organized (I've also done sales).

I'm not against spending the money on things that move the needle, but I also know that every dollar we spend on extra plane tickets/ meals/ drinks is money we could be spending to grow our marketing budget or improve the product. My team or I usually catch the dumb stuff on reimbursements, but the overstaffing is always "justified."

I really hate getting involved in the expense management nitty-gritty, but I do think our team is undisciplined.

How should I try to change this cultural issue?

Thanks for this question, Early Stage CFO.

I’ve been there. And I’ll be honest, it makes me want to puke.

First up, don’t worry, you are not in the “expense management nitty gritty.” What you’re talking about is strategic. It’s culture setting. It’s about the kind of business you want to be.

A CEO who won’t live by their own expense policy is not fit to hold the title. You have no hope of fixing the culture as long as that is the case.

I once saw a business with a very strict hotel night-rate limit. It applied to everyone. No grades. No exceptions. Same rule for all.

A new COO joined. Unused to that culture. They understood the policy but decided they preferred somewhere nicer. So they self-funded the upgrade and only expensed the allowed limit.

On paper, there was no loss to the company. But a few months later, the CEO fired them. Why? Not because of the money. Because he believed that choice said something about what the COO stood for, and that meant they couldn’t work together.

You might agree with that decision. You might not. It’s a matter of values and taste. But you couldn’t accuse that CEO of being inconsistent on the message.

A CEO who won’t live by their own expense policy is sending a signal whether they mean to or not. And culture is downstream of signal. Especially CEO signals.

You can’t run a tight ship if the captain is quietly drilling holes in the hull.

Now, before we go nuclear (and fear not… we will), let’s separate two issues:

They are not the same.

The first is integrity and consistency. The second is more of a capital allocation discipline question.

On the policy breaches

If you truly have a written policy forbidding this stuff and he ignores it, you need to address that directly. Not through reimbursement nitpicking, but through a values conversation.

Not: “You can’t expense this.”

But: “We can’t ask the company to be disciplined if the leadership team isn’t. It undermines everything we’re trying to build.”

Make it about credibility and reputation. Not money.

If he wants looser rules for execs? Fine. It’s not to my taste, but plenty of companies do that. Rewrite the policy transparently.

But do not run a shadow version for the CEO. Once people smell hypocrisy, the rot spreads fast.

On overstaffed trips and “revenue justification”

This one is trickier because there is judgment involved.

Classic CFO theory says every expense needs a business case. I don’t fully subscribe to that. It’s very easy to look back and say, “There was no ROI on that trip.”

But some of the best relationships I’ve ever built came from just getting on a plane and meeting people, with no short-term objective beyond building trust.

So instead of fighting trip by trip, zoom out.

Agree on what is a reasonable amount to invest in relationship building over the next 12 months. Set a pot aside for it. Make it explicit.

Now I can already hear you: “What if the pot gets abused?”

It will get abused. At least initially, based on your current culture.

Which brings us back to the start.

You don’t fix this with a tighter expense policy. You fix it by defining the culture you want to build and getting your CEO to role model it.

That is infinitely more powerful than being the company’s chief receipt inspector.

TLDR:

This isn’t about plane tickets. It’s about tone from the top. Fix hypocrisy directly. Culture follows signals.

SSCFO from Canada asked:

For an agricultural-related startup, given inventory is invested during harvest season, but sales happen across the year, my question is this: What’s your strategy in this kind of business for capital allocation (scaling up spending on team, sales & R&D, and fixed expenses) and treasury management?

Love this question, SSCFO.

If you’re in the ag business, there are three things you need to bake into your model from day one. Not as isolated finance “risks,” but as core features of the business.

1. Seasonality of working capital

Your peak-to-trough working capital will grow as you grow. That’s not a finance issue or an inconvenience. It’s the business you are in.

You invest cash ahead of harvest. You unwind it slowly through the year. As you scale, that seasonal bulge gets bigger. So your funding model has to be built for that peak, not the average month. And remember that peak grows as you grow.

2. Commodity price volatility

You don’t control your sales prices. The market does. And the last five years should have cured anyone of the idea that commodity markets are “stable.”

You will need to become a ninja at managing forward contracts. Especially in a growth business, where your volumes are moving at the same time as prices.

Small errors in growth assumptions can leave you:

3. Harvest quality and yield

If you think you don’t control your pricing… wait until you hear about the weather.

Yield and quality volatility can move revenue and margin materially. That has to be in your models and consistently reforecast.

On capital allocation (team, sales, R&D)

Honestly? Funding R&D, the team, and fixed costs is trivial compared to revenue volatility management.

Your overhead scale-up costs are predictable. They are controllable. You link them to your growth plan and your equity rounds like any other startup.

What is not predictable is:

So I would explicitly think about this in two funding “strips”:

Strip 1: Working capital + hedging collateral

This is structural, seasonal, and volatile. It needs committed facilities sized to manage the risks at your current (and future scale levels). Don’t forget, forward contracts need collateral, and as a start-up, that is likely to need to be cash backed… so a funding requirement.

Strip 2: Growth overhead

Team, sales, R&D, fixed expenses. These scale off confirmed margin and secured funding.

Do not let seasonal cash peaks trick you into hiring aggressively mid-cycle. You need to be extremely disciplined.

Most importantly, you HAVE to build a great forecasting regimen from day one:

Get it wrong, and you end up short of working capital or on the wrong side of a forward contract. Treasury in this kind of business is not a back-office function. It’s basically a board seat. It’s your job, alongside your CEO. It’s that important.

Revenue volatility is the norm in this business. It IS the business. Specifically, how you forecast it, manage it, and fund the scaling of it.

Frankly, this is the startup CFO world in ultra hard mode. SaaS is a cake walk by comparison.

TLDR: In ag, working capital and price volatility are the strategy. Fund for the peak, separate growth spend from seasonal risk, become a ninja at forecasting, and treasury is a front office function.

Pockets from Australia asked:

In your C-Suite Politics Part II, you mention the need to sniper shot a C-Suite peer. I'm dealing with an issue where one of my peers is a nice guy but is bringing the whole ship down (and other execs will start quitting if he stays). Do you have a framework or approach you recommend for structuring those conversations with the CEO? I've done this successfully before, the only other time I loaded the rifle, but it was more of a toxic culture situation, so it was easier to frame and convince.

These are always tough.

The “nice, but s**t” exec is dangerous. No one wants to fire him because he’s nice. But no one wants to work with him because he’s s**t.

So there is a way to handle this, but there is important prep before you take the shot.

First up, I’ve seen this movie before. These people can become blame magnets for everything that goes wrong. Often, because they’re too nice to push back or too oblivious to see the knives coming. So you need to be absolutely sure this isn’t that. Make sure they really are as bad as you think, and you’re not just projecting wider frustration onto the soft target.

Next, fairness.

You shouldn’t blindside him. Can you look yourself in the mirror and say you’ve done everything possible to help him succeed?

Have you:

Not hints or side comments. Face-to-face candid feedback.

If you haven’t done that, you don’t get to load the rifle yet. It’s not fair.

If you have done that, and he’s still sinking the ship, then the knife is probably justified. Just make sure it’s a knife in the front, not the back.

Once you’ve done those things, the CEO conversation writes itself.

You lay out:

Do not walk in and say, “He needs to go.”

Just say, “This isn’t working at the level we need, it’s putting the business at risk, and something has to change.”

Let the CEO reach the firing conclusion. That’s their call. Not yours.

One thing I will add is: prepare for blowback. It depends on how the CEO handles it, but that is not in your control.

So, at the extreme end, consider the implications if:

Only you can answer those questions, but think about it because once you escalate, you can’t unring the bell.

TLDR: Don’t snipe a “nice but sh*t” exec until you’ve given direct feedback and real support; once you escalate to the CEO, stick to impact, not emotion, let them draw the conclusion, and be ready for the fallout.

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.

And this week in ‘twists I wasn’t expecting my CFO career to take’ …

AI is proving the perfect smokescreen for lazy CEOs to row back on two big regrets they might have from the pandemic era:

It’s the perfect ‘elegant out’ for a CEO who has known for a while that a reset needs to happen, but wasn’t sure how to message it. Bear that in mind when you read these headlines and attribute it all to AI brilliance.

Unlike most CFOs, I’m not a fan of demanding ROI on every piece of marketing spend. It’s the scourge of creativity. Imagine if 100 years ago, a Coca-Cola exec had to justify to their CFO running an ad featuring a big jolly man in a red coat.

Plus… if Gary Vee is on your side, you have to question if you picked the right side:

Check out my Substack, it’s where I pull from my notebook to give you raw and uncut ideas as they flow out of my head. Check out recent highlights and join the conversation.

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

Feedback on Saturday’s playbook was great. People really enjoyed seeing the CFO grade storytelling frameworks tied back to FP&A and variance analysis. Read it here.

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.