When fintechs start to grow and develop, being a financial leader becomes much more than mere accounting. With the company growing and expanding into new markets, attracting investors, and complying with more complicated regulations, the right finance leader may play a decisive role in this process.
However, one needs to ask themselves whether the company needs a CFO or a Finance Director.
Although the functions of these two positions may be similar, they cannot be interchanged. The decision lies in the development phase of the fintech in question and the complexity of its finances.
Also Read: FinTech C-Level Hiring: How to Secure Leadership for Rapidly Scaling Startups
A Finance Director’s primary scope of work involves finance management and control in the company. Such tasks could comprise financial reporting, budgeting, forecasting, cash flow management, etc.
The role of a CFO is usually much more strategically oriented compared to that of a Finance Director. Besides managing the finances, a CFO collaborates with a CEO, board of directors and shareholders to formulate business strategies and explore possibilities of future growth.
These roles differ even more in a fintech setting. The fast pace of growth, large investments in technologies, regulatory requirements, fundraising activities and expansion across borders all make finance a strategic issue.
For a start-up or scaling fintech, the role of Finance Director may offer the appropriate mix of financial knowledge and experience in managing the company’s operations.
Where the company already has reliable sources of income and requires more control over its financial processes, then the good Finance Director would help in establishing the necessary structure for the next step in its growth path. It might include improved management reporting, implementation of financial controls, budgeting, forecasting, and overall financial discipline.
A Finance Director will be especially useful in the case where the founders and the executive board will retain control over making strategic decisions.
It might mean that at this stage the company does not require capital raising, nor does it need to deal with the intricacies of managing the investors.
As a fintech company evolves and enters more complicated stages of development, the necessity of having a CFO becomes even more urgent.
A CFO usually fits well with companies that are about to start serious fundraising activities, enter new markets, undertake M&A operations or meet increasingly complex demands from investors and the board.
The CFO can assist the company’s management team to find answers to questions like:
- How should the money be invested?
- In what markets is there maximum growth potential?
- Is the business model scalable enough?
- What should investors see before raising funds again?
- How can profitability while not limiting growth opportunities?
- What financial risks might emerge when expanding into new markets?
In the case of a fintech company operating in several countries at once, the position can become even more strategically important.
The financial pressures that fintech companies experience tend to vary significantly from those of traditional firms.
Payment flows, customer acquisition cost, transaction volumes, liquidity, regulatory capital, fraud risks, and technology investments will be some of the factors that might impact the performance of the business. As a result, the finance executive should be knowledgeable about both accounting and the commercial and technological reasons why the firm exists.
This is when recruiting purely on the basis of a job title becomes risky.
For example, a Finance Director who has extensive experience in the fintech industry could prove to be a greater asset to a fast-growing company than a CFO whose experience comes from the traditional corporate world. In the same way, a fintech that wants to expand overseas could gain much from a CFO with relevant experience.
The answer is not always clear-cut.
For example, the role of the Finance Director is more appropriate where there is a need for control and effective financial systems.
The position of a Chief Financial Officer is more desirable if the finance department is an integral part of the strategy development, fundraising, investment management and expansion of the company.
The main point here is to evaluate the company rather than just fill the position.
Beyond financial reporting, the correct choice of a finance professional can affect much more. With an emerging fintech, it can affect the company’s decision-making process, contribute to corporate governance, help the company expand and empower the rest of the leadership team in making better choices.
That is why it is so important to find the right combination of sector experience, strategic skills and leadership qualities.
At Robbert Murray & Associates, we understand that finding the right finance professional means more than just fitting someone’s CV into a job description. Our approach lies in comprehending the organization itself, its plans and the leadership skills needed for this.
If a fintech needs an efficient Finance Director right now or a CFO with a strategic approach in the future, the aim must be the same – to find a financial professional who will grow along with the business and provide commercial benefit.
