As CFO for Over a Dozen Startups, She’s Got Finance Spend Tactics Down to a Science

During the early stages of startup growth, you’re stretching every dollar of that Series A and B funding to make it count.

A strategic finance operation can help you do that. And you can have one even if you don’t have the resources to build out an entire finance team quite yet.

As a CFO in the startup world, Andi Ruda knows how to circumvent excessive spending, implement solutions that meet business needs, and maximize the return on investment.

“With technology today, financial transparency and controls don’t need to rely on endless time from an expensive resource which may have been true ten years ago,” Ruda said. “I lean on automation heavily. So rather than relying on my time as one single resource, I seek out tools to help my clients scale efficiently wherever possible.”

Formerly CFO at jewelry retailer Alex and Ani, Ruda founded Rainbow CFO in early 2021, an organization offering fractional CFO services to startups. Her years of experience working with eCommerce and retail businesses as a consultant and CFO laid the foundation for the clients she works with today.

Ruda is in the finance game to help companies grow and spend wisely. That philosophy is evident in her business model, which includes minimizing her own paid hours to ensure clients only pay for the services they need from her each week. Through her work with startups over the years, Ruda has identified common spending pitfalls that founders and CFOs should avoid—and she’s developed scrappy strategic finance spending tactics to keep the organization lean and efficient without sacrificing growth.

3 Common Spending Issues Among Startups

To optimize your startup’s spending, Ruda suggests avoiding three pitfalls: overspending on marketing, charging ahead on full-time hires, and mismanaging new capital.

1. Overspending on Marketing

Common among startups is the debate of pumping money into marketing to continuously grow the topline vs. achieving profitability on the bottom line.

“The problem a lot of us struggle with is understanding the margin impact we’re willing to take today in hopes of acquiring customers that will return time and time again over the long haul,” Ruda said. “For many startups, acquiring customers is expensive and a key reason for seeking venture funding. Understanding your own business’s CAC/LTV economics is critical in ensuring you’re not in a never-ending cycle of pushing all cash flow right back to Facebook.”

Ruda works with clients to compare forecasts to actuals, finding meaningful discrepancies in marketing spend—particularly with digital platforms like Facebook. Her suggestion: run small tests with other supplemental forms of marketing that might be equally efficient but are less likely to get out of hand. Another tip Ruda offered was setting budgets based on CAC and ROAS rather than fixed-dollar-amount marketing budgets that could drain your pockets if inefficient.

2. Charging Ahead on Full-Time Hires

Hiring is an exciting landmark in startup growth, but Ruda warns about jumping the gun by building a team of full-time employees too quickly.

“Once you raise a round or revenue starts picking up, there is a rush to bring on your full-time team,” she explained. “Maybe I’m biased as a fractional CFO, but I believe whole-heartedly in the contractor model for delivering expertise and accountability in roles that may not be ready for 40 hours a week yet. Especially as your business model is evolving, you may not even know the exact expertise you need most to invest in and work with longer-term.”

Once you progress beyond Series A/B funding, hiring for critical full-time roles becomes more critical as investors shift focus toward rapid scale and a potential path to going public. It’s at this point you’ll get more bang for your buck in paying resources a salary and utilizing their full attention on your business.

3. Mismanaging New Capital

You’ve kept your belt tightened and spent responsibly for so long. When a new round of funding comes through, it’s tempting to start swiping the credit card and racking up bills for all those wish-list purchases. In Ruda’s experience, an influx of funding shifts businesses’ mental state from famine to feast.

“It’s important to always remember your resources are scarce,” Ruda said. “I have observed the difference in spending habits between a company having a 2-3 month runway vs. deep pockets right after a fundraising round.”

Ruda challenges founders to keep new funding in a separate interest-yielding account and move their monthly budgets into a business checking for spending to avoid unnecessary splurges. The act of having to move more than allocated is a good flag to a founder that their burn rate may be accelerating beyond initial plans.

How to Optimize Finance Spending at a Startup

You’ve got common spending pitfalls to avoid. So what can you do to get personalized financial expertise while continuing to save on back-office spend?

“It’s never my goal to be spending a ton on back-office functions when the topline (i.e., product and marketing) needs every dollar it can get” in the early stages of a business, Ruda said.

That doesn’t mean you should never invest in the finance function. But rather, it means optimizing spend by contracting part-time resources, automating processes, and slowly growing your internal finance team. Founders and early finance leaders should take note of Ruda’s timeline and tactics for optimizing finance spending at a startup.

Stage 1: Set the Foundation for a Full-Time Finance Lead

Clean up your books with an outsourced accounting team 

Don’t underestimate the power of clean books and a routine close. Spending a few hundred dollars a month on an outsourced accounting team is an affordable way to make sure your house is in order in the earliest days of your business—before a founder even considers adding a finance hire to the business.

Consider adding a fractional CFO

With clean books in place, founders can fully leverage the value of a fractional CFO for building their first financial model and strategy.

Ruda wouldn’t have started Rainbow CFO if she didn’t believe in the fractional CFO model—especially for startups that aren’t yet ready to bring on that first finance leader full-time. “My goal is to give my clients increased transparency and understanding of their business model for as few hours as possible,” she said.

As she jumps in with new clients, Ruda works to determine a startup’s top priority in its hierarchy of needs, whether it’s managing cash, P&L management, or hitting profitability goals.

“Because most startups I work with have never had a fractional CFO before, I like the crawl-walk-run approach,” she explained. “We don’t need to model everything out day one, and if I introduce too much too fast, the team may not even leverage the full value. That’s why I pick the business’s burning platform and focus on that first. The beauty about finance is that if we pick cash flow management to start, it will illuminate issues on the P&L and balance sheet and vice versa.”

Lean into automation

Finance technology is an investment that continues to deliver value over time, especially when it replaces the need to pay a human to perform a time-consuming manual task or pull in valuable data for strategic financial decision-making.

“We live in a world where the data is the most valuable resource you can invest in,” Ruda said. “What’s great about tools like Mosaic and others is that it’s a customizable platform. You get to build what’s really important to your business without having to reinvent the wheel to achieve automation. And it’s constantly refreshing. So it’s not me, sitting behind a spreadsheet, updating the numbers, and charging you time. I get to come in, analyze the data, share recommendations, and deliver value quickly and in real-time. Everyone wins.”

Grow to a full-time finance leader

You’ll eventually reach the point that a fractional CFO won’t cut it. It’s time to hire!

“There’s not an easy formula, but basically plan that by no later than your Series B, you’re going to need a full-time senior finance leader,” Ruda said. “It may be sooner for some companies, and I help my clients determine when they need someone devoting their full attention to the business model.”

Stage 2: Optimize Your Back-Office Spend as the First Finance Leader

Keep your outsourced accounting team

Once your CFO is in place, you don’t necessarily need to start headcount planning for a full team right away. An outsourced accounting function can suffice far beyond when a lot of founders might think, Ruda suggested. “I love working with an outsourced accounting function because it spreads accountability across parties and allows for a checks-and-balances mentality between Accounting and Finance.

Focus your time on strategy

At startups, the initial finance hire doesn’t yet have the pressure of managing direct reports. But they also don’t have a team to manage the smaller minutia of running a business. You’ll have plenty of tasks eating up your time, and this can make it difficult to prioritize the 30,000-foot view at all times.

“Strategic finance to me is taking the numbers and data that are laid out for you, organizing them in a way you can make sense of, and providing recommendations on pricing, hiring, marketing spends, and other key business decisions,” Ruda said. “It’s easy to get pulled so in the weeds of the day-to-day tasks at an early stage company that there are not enough hours in the day to focus on what matters most. Make the time for that higher level strategy always, and seek out automation to minimize the tactical aspects of finance wherever possible.”

Optimize Spend by Owning Your Seat at the Strategic Table

The role of a finance leader matures in lockstep with a startup. That’s essentially what makes a good CFO. At every turn, you’ll most likely be the one with the strongest understanding of the company’s inner workings, Ruda said, because you understand the operating model and the way every dollar moves in and out of the company.

But that vantage point only helps you optimize spend and drive growth if you’re prioritizing collaboration. Bring your insight into the business to partners across sales, marketing, the executive team, and every other department.

“Honestly, that’s why I love being a CFO so much, is because it gives me a seat at the table to actively participate in the decisions that shape the future of a business,” Ruda said.

“The sky’s the limit for where the role can actually go.”