Russ Jones on Turning Finance into a True Strategic Partner
Russ Jones, former CFO of Shopify, discusses what it was like to build a finance team at a hypergrowth company and the keys to developing strategic partnerships across the organization.
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Russ Jones on Turning Finance into a True Strategic Partner
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Building a finance team means investing in processes, tools, and people. But, making all three segments successful can be time-consuming and requires having a CFO ready to look outside the box and build partnerships with every department within an organization.
That’s easier said than done, but fortunately, there are success stories that prove it is possible.
In this episode of The Role Forward, our host Joe Michalowski welcomes Russ Jones, the former CFO of Shopify. The two discuss what it was like growing a finance team in a company such as Shopify, the challenges and lessons learned, and the importance of developing a partnership between finance and other departments.
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Russ Jones was the Chief Financial Officer at Shopify from 2011 to March 2018, guiding the company through its 2015 IPO process. Prior to joining Shopify, Russ served as Chief Financial Officer to Xambala Incorporated in San Francisco. He then went on to co-found CFO4Results, which provided interim Chief Financial Officers, business and operational support services to a number of early to mid-stage technology companies.
- Don't fall into the early-stage trap of thinking you can build the right processes and controls later on. Do it as early as possible.
- If a system works for finance but not for anyone else, then it doesn't work at all. Finance needs to focus first and foremost on being a strategic business partner.
- Growing a finance team starts with understanding your own strengths and weaknesses as a finance professional.
Episode Highlights from Russ Jones
4:22 — The Role of Modern FP&A
”I view the FP&A role as critical as the accounting role for any company. Once you get the accounting side working, the FP&A role may be more important as you think about how to grow and create a profitable business.
Initially, I was the default person or the FP&A person at Shopify. On my first day on the job, Toby, who’s the CEO, came to me and said, ‘We have a board meeting the following week. [This was March of 2011.] We haven’t yet presented an operating plan to the board. And it would be great if you could do that.’ […]
I think the first operating plan I did there on operating expenses for the full year was 1% off. So it was probably the closest I’ve ever been to an operating plan. But we started to build a function.
About two years in, we hired the first dedicated person, which was in the role of financial planning. They sourced the system that we were gonna use and were involved in the implementation of that. And then started to produce the operating plans on a routine basis.
And then, as the company scaled, we started to add dedicated resources that were focused on particular business areas. And that’s a good way of scaling the business.”
14:45 — Processes and Systems Should Be Open to Improvement or Changed
”Something goes wrong in a company, and all of a sudden, this new process is put in place to make sure that it doesn’t happen again. […] And as the company evolves, you constantly need to be looking at whether this process is still adding value. And, if not, then how do you eliminate it?
I think that’s a constant goal. And in the same way that technical debt can slow down a company in how they’re trying to develop products, processes or managerial debt could do the same. It takes forever to get a decision made or something bought and stuff like that. It’s an important thing for finance people to be thinking about.”
26:05 — Building a Shopify Finance Team
”I hired an accounting manager because I needed to have someone who could make sure that the books got closed correctly. And with that individual and the part-time accountant, we ran the finance function for the first couple of years. And then I brought in a manager of financial reporting. You start bringing in more accounts, payroll people, and things of that nature.
When it comes to specialty roles, one of the first was tax because tax is an area of its own expertise. […] Treasury is another one. […] I’ve seen people combine tax and treasury. I think that’s not a bad way of doing it, but at some point, getting a separate treasury function is another key.
And then, adding technical accounting people as things get more complex. Adding someone to an internal audit function is another key one. And, I wanna do a lot of these well in advance. If you think your plan is to go public — once you decide to go public, you really wanna go as fast as possible.
And so you don’t wanna be discovering things at that stage that are gonna slow down the process because there are market windows, and it’s a lot of effort. So when you decide the answer is going public, go as fast as you can.”
[00:00:00] Russell Jones: And the other mistake, I think sometimes people make is they think that computers or buying new software will solve the problem.
[00:00:08] But if fundamentally your process isn’t working, automating something that’s not working isn’t magically gonna make it better. So it’s, again, something people should, should really think about.
[00:00:43] Joe Michalowski: Hello and welcome to another episode of The Role Forward podcast. My name is Joe Michalowski and this episode is brought to you by Mosaic, a strategic finance platform that transforms the way business gets done. And today very excited, our guest is Russ Jones, the former CFO of Shopify. Russ,
[00:00:56] Joe Michalowski: thank you so much for joining me.
[00:00:58] Russell Jones: Oh, thanks, Joe.
[00:01:00] Joe Michalowski: Cool. Well, before we dive into main topic, and there’s a lot we can talk about, the story you’ve had at Shopify is amazing, but do you mind giving everyone the quick background of who you are, what your career has looked like, how you got to Shopify and, and some of what you’re doing now?
Russ Jones Introduction
[00:01:13] Russell Jones: Sure. So, I’m a CPA with 40 plus years of industry experience of which the bulk of it has been in, in high tech. And I’ve worked for large companies, private companies, small, public. I also, for a period of time, co-founded a CFO for a higher firm where we focused really on, on helping sort of early-stage companies get to the, the next level.
[00:01:39] Just prior to Shopify, I was in California for three years. I helped turn a semiconductor company into a high-frequency trading company. So, I’m not sure many people have done that in their career. And just to make it a little bit more interesting, we did that during financial crisis. So, definitely a fun period.
[00:01:57] Russell Jones: And then we moved back to Canada, to Ottawa, which is the capital. And shortly after we were back, I got introduced to the Shopify team by the external corporate council, who is somewhat I had worked for in the past. And so, spent seven years at Shopify and then retired in, in March of 2018.
[00:02:18] And since that I’ve been doing both board roles, as well as some advisory work, just to keep me busy, which I must admit, during the COVID period, was quite welcomed that at least I had something to look for other than the, the four walls of my house.
[00:02:35] Joe Michalowski: No doubt. I can, I can definitely relate to that. I I’ve been working at home a long time, so I’ve been stuck at the four walls of my house for a while, but I can imagine you get a little stir-crazy if you’re heading toward the later years of the career and it’s, you just need someone to keep you busy, so it’s great.
[00:02:49] Russell Jones: It’s actually crazy how well remote work has gone. I mean, one of the boards that I joined only recently, did I actually meet anyone both on the management team and other board members in person. So that’s kind of surprising. And also just the fact that auditors have been able to operate in this environment, whether messy it can be, I think has been quite impressive.
[00:03:10] Joe Michalowski: Yeah. Crazy. You know, you mentioned something about a semiconductor company. It was funny. That was my first job out of, out of school. I was a technical editor for a company called Analog Devices. And, yeah, spent a lot of time editing like 300-page manuals for semiconductors. So that hit a little bit close to home
[00:03:27] for me. It was a nice little reminder where my career started. But we’re not here to talk about me. So, we are here to talk about you. And I’m, I’m really excited to have you on. Obviously, the experience you have is amazing. And I think people will get a lot of value out of, you know, what we talk about today, which is really around kind of the role of FP&A at a high level and kind of how it’s transforming and,
[00:03:47] you know, scaling companies in that context. And so you were at Shopify, I think we had talked before you said it was a Series A or it was early stage when you started, took it all the way to IPO. So, you know, it’d be great, great experience in like a hypergrowth company, taking it from, you know, early to where everybody is really trying to, to get to.
[00:04:07] And so, as a starting point, can you just talk a little bit about, you know, what your view of the modern finance FP&A team looks like? What is the team’s role these days and how has that evolved since maybe like the earliest days of your career?
Thinking About the Modern FP&A Function
[00:04:22] Russell Jones: Yeah. So the, I mean, I, I view the FP&A role as critical as the accounting role for any company. And in fact, once you get sort of the accounting side working, the FP&A role really is, is even maybe more important as you think about how do I grow and create a profitable business. Initially, I was the default person or the FP&A person at Shopify.
[00:04:46] It’s kind of interesting on my first day on the job, Toby, who’s the CEO, came to me and said, “Well, we have a board meeting the following week.” This was March of 2011, “And, uh, we haven’t yet presented an operating plan to the board, and it would be great if, if you could do that. And, oh, by the way, later this week, and for a good part of next week, myself and most of the rest of the leadership team are gonna be at South by Southwest conference.
[00:05:12] So, uh, good, good luck on that.” And we were able to do it. And in fact, I think the first operating plan I did there, I think at the on operating expenses for the full year, I think I was like 1% off. So it was probably the closest I’ve ever been on a, on an operating plan. So, but we started to build a function.
[00:05:32] We probably about two years in, we hired sort of the first dedicated person, which was in the role of financial planning. We had that person start, they actually sourced the system that we were gonna use and then were involved in the implementation of that. And then really started to produce
[00:05:49] on a routine basis of the operating plans. And then, as the company scaled, we started to add dedicated resources that were focused on particular business areas. And that’s kind of a good way of scaling the, the business.
[00:06:03] Joe Michalowski: Yeah, it makes a lot of sense. I want to kind of track that from early days. So I wanna start in these early days and talk about kind of the, the processes. If you’re talking about building an operating plan, I wanna dig a little bit into, you know, what that took. And so it sounds like you were the first finance hire, first finance accounting hire at Shopify?
[00:06:21] Russell Jones: Well, I was the first sort of full-time finance person. So just a bit of a background there. I joined when there were 50 employees, and the finance team was a part-time accountant and the CEO’s mother-in-law, just to put it in, in perspective there. And actually interesting enough, one of the reasons they started to look for a CFO, and I’m sure in the initially like Toby wasn’t even actually sure
[00:06:45] what a CFO did, was because one of the Series A investors said, “Okay. Toby, I’ll, I’ll invest in your company, but you have to promise me you’ll use some of the money to hire a proper finance person.” So that’s, that’s a bit of the, the backdrop there. And some of the initial actions that I took there.
[00:07:03] So one was moved to a December year-end, start reporting US dollars, start reporting in under US gap, get in a position that we could actually get the financials audited. And my perspective on that is, is you always want to build the company that it could go public knowing that in most cases companies don’t go public. They either get bought or some other event takes place.
[00:07:27] And so, I think that’s an important thing as people are sort of thinking about their own context and where they are from a business point of view and where the company sits there. And it was funny in the early days, there was some things I got exposed to that were quite funny. They called ‘receivables negative payables’ was kind of a, an ironic one.
[00:07:50] And then the other thing was they had this concept of revenue leakage that they mentioned to me early on. And so I had to sort of try to get my mind around that one.
[00:08:01] Joe Michalowski: Wow. Well, that, it’s also interesting, I, I love the stories about kind of like formalizing that finance function, because, you know, going from a mother-in-law and it’s outsource for keeper is probably an experience for you, especially like you’re coming in. You, you’ve been in this job, you’re not like a, you know, late twenties person, like in their first like leadership role. Like you’re coming in, you’re established and you’re ready to hit the ground running, and you have all this to do. So,
[00:08:28] I, I want to dig a little bit into more of the processes. So you mentioned converting to, to US dollars, in that context, I wanted to ask like how, how you go about establishing processes early and what sorts of processes help. Can you talk a little bit more about that story? Why that was so important to, to Shopify’s scale? And maybe, like, if you have another example of what was important there, I would love to hear it.
[00:08:52] Russell Jones: I mean, it’s, it’s important in the sense that we wanted Shopify to look and feel like any other company that the investors were investing in. So doing that and doing something like that early on when it’s much smaller is obviously easier than trying to do it, sort of the, the month or so before you go public.
[00:09:13] But, I think it’s also important and I’m a firm believer, like you gotta sort of really focus on the systems and the processes early on. Like I think a lot of finance teams make a mistake that they just do something to get the job done. And then they say, “Well, later on, we’ll, we’ll sort of put in the right processes or the right controls.”
[00:09:34] And then all of a suddenly, they’re trying to go public and they don’t have, they get a weakness, a comment in their filings and stuff like that. So I think it’s very important that you do that stuff very, very early on. I mean, I talked a little bit earlier about this revenue leakage.
[00:09:50] And what it was is just to put it in context is the view that from what was invoiced to what showed up in the bank was different. And so I had to actually go through it sort of step by step and sort of go from the invoice to the credit card company who took fees to the bank who took fees and followed on.
[00:10:12] And part of it was just timing, like the invoicing assumed that was today the credit card processing because they were on a TIBOR in time, part of was tomorrow. And so just doing that alignment was a big part and, and it was really a roll up your sleeves. And it probably took me a week to sort of get to the point that it, I knew that it was right.
[00:10:31] And then from there we could automate it. And it’s, I mean, it’s the same sort of basic spreadsheet that I developed back in 2011. That’s 2011, that’s now just been automated by a computer, and now it’s obviously much more sophisticated than that, but it also allowed as we added new revenue sources to sort of just sort of keep going there.
[00:10:51] Russell Jones: And I think that’s an important thing is always thinking about like, if you’re gonna be a billion-dollar company, ten-billion dollar, like would this process scale for that? And if the answer’s ‘no’, then fix it quite as soon as you, as you can. And I’ve also been fortunate to be another sort of growth business,
[00:11:10] so I really understand like how something can scale. And if you’re not careful, like finance can become a bomblike of scaling the business. And you never wanna be in that position. Now, did I, I think back in those early days of 2011 that Shopify would go from 5 million to this year they’ll probably do 5 billion of revenue?
[00:11:31] No, but, uh, I have been in other businesses as where they have seen also good growth that I think the importance then of like I say, putting the right systems and processes in place is something you really do. And the other mistake I think sometimes people make is they think that computers or buying new software will solve the problem.
[00:11:52] But if fundamentally your process isn’t working, automating something that’s not working, isn’t magically gonna make it better. So it’s, again, something people should, should really think about.
[00:12:03] Joe Michalowski: Yeah. These are all great points. I, I wanna ask a follow-up question of the revenue leakage thing, ’cause, you know, selfishly, I, I was just working on something for our website. It was just about the concept, we have like this metrics catalog, it’s a, it’s like a glossary. We’re writing about AR aging.
[00:12:17] So we’re writing about the process of like, we invoice somebody what is the process of getting that like booked revenue to collections. Is that, is that really what this revenue leakage process is? Because I know something like, you know, just the process of like uncollectable debts. That’s not really like credit fees or anything, but does Shopify have a different perspective on that or is that really just their way of looking at that process?
[00:12:39] Russell Jones: No, it was basically, I invoice a merchant for a hundred bucks, and $93 show up in the bank account. Hm. What happened to that $7 along the way?
[00:12:51] Joe Michalowski: Yeah. Yeah. Cool.
[00:12:53] But I must admit the first time I heard the concept I had to sort of think hard, “What does everybody talking about?” Definitely like a… I think we should be proud of.
[00:13:04] Joe Michalowski: Yeah. Have, have you heard that since, or is that very uniquely at Shopify context?
[00:13:08] Russell Jones: Not as Shopify, I think the same way as the negative payable was. And, and I think part of that is, is Toby when he was trying to do some of the initial finance stuff, googled accounting. And, and was on a bank site and from a bankside it’s, it’s almost the opposite from the company side. And so the terminology and it actually got embedded in some of the software itself.
[00:13:32] And so I had to go and get rid of that.
[00:13:34] Love it. I think, you know, that’s why, you know, having someone like you in a role is, is so important. We talk a lot about it here, just getting that finance role in sooner rather than later, just because this is the kind of stuff that will start to pile up and hurt a company. So I think they’re probably fortunate that investor was, was pushing them to get this finance hire in sooner.
[00:13:55] But to, to this end, I was reading, uh, another interview and you talked about managerial debt. And I think it ties into this concept of like how you scale, how you set up these systems. So I was wondering if, if you, one, if you remember talking about that. And if you could kind of give us the, the overview of what that means and how finance has a role in minimizing it? ‘Cause it’s not something you hear every day about, you know, finance’s wider management involvement.
[00:14:20] Russell Jones: I think everyone’s, so the other side of managerial debt is technical debt, which I think people are familiar that as over time, the, the product gets more complex. It’s tougher to do new features, it gets slower and stuff like that. So it’s really the same thing provided to the systems that processes side. And a common example is that something goes wrong in a company,
[00:14:47] and all suddenly, this new process is put in place to sort of make sure it doesn’t happen again. Where at the Shopify, our approach was really, “Well, let’s deal with the person who caused that problem first and then figure out whether or not we need to, to change the process.” And as the company evolves, you constantly need to be looking like, “Is this process still adding value?
[00:15:10] And again, if not, then, then, how do you sort of eliminate it?” And I, I think that’s a constant goal. And in the same way that technical debt can slow down a company in terms of how they’re trying to develop products, process or the managerial debt could do the same thing. And it just becomes slower as a company,
[00:15:29] it takes forever to get a decision made or something bought and stuff like that. And so constantly looking at that, I think it’s an important thing for, for finance people to be thinking about.
[00:15:41] Joe Michalowski: Are there any steps finance leaders can take to, to address that? I know finance is in a unique position that they can kind of, they have insight into every corner of the business. They have that kind of whole picture of the data that’s coming in and out. Is there, do you have any tips for people to, to actually keep an eye on that?
[00:16:01] Like what can they do and how do they work with people to actually address it?
[00:16:04] Russell Jones: The same way as a company kind of needs to be aware of their customers and, and how are they solving problems, I think finance needs to be the same. There, I mean, there’s always a, a policing function that finance needs to do, but it shouldn’t be the only thing that it does. And so, when it comes to, for example, a good one is, is expense reports.
[00:16:26] Joe Michalowski: Yep.
[00:16:26] Russell Jones: Sometimes there’s a system brought in that finance is very happy with, but everyone who has to use the system thinks it’s like a real pain to deal with. And, and that’s a good example of like, how do you automate that. So someone can just take a picture of their, of their expense report and get it processed.
[00:16:48] And, and it was funny at one time we were doing some changes there and one of the designers was complaining to Toby about it. And so during one of the hack days, I, I got that individual to help us sort of improve the process. And we started using Slack for some of that. And I, I think that was an again, it sometimes the traditional finance response was be, “Well, the person doesn’t know we need this information.”
[00:17:12] I think a better approach is say, “Okay, help us make it better. If you have some good ideas, then we’re definitely open to that.”
[00:17:20] Joe Michalowski: Yeah, I love it. That’s really, when we thought of doing this podcast and it’s in the, the intro, like the pre-roll intro that we do for this, and it’s really the idea of taking finance from like its stereotypical role as like the back office scorekeepers, and the, the number crunchers and things like that to really trying to create true strategic partnerships in the business.
[00:17:44] And I think that’s just a really great example because you get to dig into what matters to the people in the organization and how you can make their lives easier. And instead of finance being that gatekeeper or doing the policing function, as you said, they can really step up and make life easier for people in many ways.
[00:18:02] So I really like that example. So it was really, really cool to hear how you did that at Shopify.
[00:18:06] Russell Jones: And I think a good way to test that is if people are coming to the finance group to look for their help, then you know you’ve done the right, the right function. I mean, at the end of the day there’s plumbing that the finance group needs to do. I mean, the financial results have to be solid.
[00:18:23] They have to be produced on a timely basis. But as you sort of start doing that, a little bit of a Maslow hierarchy, then you could start to focus on some of the value-added side of it, which I think part of this topic is around FP&A. And I think lot, there’s a good thing where the FP&A team could really come in and sort of help take businesses to that, that next level. Because
[00:18:45] finance people do have a skill set and a way of looking at the world that is, is quite useful. And if they do it right, and partner with the whoever’s running that business, that could be a, a pretty powerful thing. I mean, I think I was lucky early on in my career. I, I was at a company called Newbridge.
[00:19:06] While I was there, they grew from like 145 million to over 2 billion. So another good growth scenario. And my role was assistant business unit manager, and so I worked with non-financial people to sort of help manage and grow those businesses. And I think that skill really, really helped me later on as kind of, I came back as a CFO where you have both that, that side as well as the ownership of the accounting
[00:19:32] Joe Michalowski: I mean, lessons aside from, for finance people, I think the real lesson here is just bring Russ in because your business goes from not that much revenue to massive amounts of revenue. So feels like a great move for all of these companies. So, love to hear all that. I think the last thing I, I’d want to ask to round out this kind of concept of, you know,
[00:19:52] essentially, what you were doing in the back end to support Shopify’s hypergrowth is any thoughts you have beyond what you’ve said already about the importance of automation and finance technology, and maybe a little bit about how that’s evolved. Like you, you’ve seen kind of the evolution of what finance tech
[00:20:11] looks like, so maybe the difference between what you focused on automating, maybe it was expense reports and your days at Shopify versus now when you’re working with companies or you’re consulting. Like what are some processes that they should really focus on automating a way so they can focus on that hierarchy that you mentioned?
Areas of Opportunity for Finance Automation
[00:20:29] Russell Jones: Well, the whole billing process I’ve seen at companies, particularly if they’ve done a lot of M&A. You could see a company that has four or five billing systems in place that they’re trying to manage, or they had one way of pricing, and now the business has changed and they’re doing another way of pricing.
[00:20:47] And now it’s very sort of cumbersome to try to do that. So I think the extent that you can make sure you, not only that it’s cost-effective, but you have that flexibility that as you need to pivot, or you buy something new, that you can sort of adapt to that, which is it’s interesting for enterprise software.
[00:21:08] I mean, Toby used to say that the more you spend, probably the more you are willing to accept in terms of the system not being as good as it could be, where the whole Shopify philosophy is like someone during their lunch hour could get the system up and running, right? So, so I think that’s something that, that people should think about.
[00:21:27] And when we were looking for a GL, the amount of volume that we were sending actually was more than the GL systems out there could handle. And so we had to build another system between sort of the Shopify platform and the accounting system that could then consolidate that. And, and the added advantage there is when we were had to be SOX compliance and get audit it,
[00:21:52] Russell Jones: that sort of subsystem was in scope, but the platform itself didn’t be in scope. And so that gave us some flexibility there as well.
[00:22:00] Joe Michalowski: Wow. Is that, that’s a tool you built internally?
[00:22:03] Russell Jones: Yeah.
[00:22:05] Joe Michalowski: Who do you, do you work directly with your engineering team on that? Do you hire somebody new in finance to, to manage that kind of technical process? Like, what does that look like to actually make that happen?
[00:22:18] Russell Jones: So there was a gr an engineering group that were involved a lot in sort of the admin side of Shopify, which is what the merchant see in the invoicing side. And so we would work closely with that. We also would work closely with the data group. I mean,
[00:22:33] Joe Michalowski: Yep.
[00:22:34] Russell Jones: I mean, there’s an example, like when early on the data group reported to me and then we had to do sort of a major infrastructure improvement, which becomes a lot more technical.
[00:22:43] And so it went to R&D and then it comes back and so…
[00:22:47] Joe Michalowski: Yep.
[00:22:47] Russell Jones: Also being willing to sort of figure out like where should things fall that make the most sense, I think is an important skill for finance and making sure that silos don’t get developed. Because I think as you noted before, like, like the finance group sees everything. And so by being that group that can make sure that the pieces are all working together and people are communicating, that’s a real value add. And there’s a lot of, interesting enough, I think one thing I’ve learned is there’s a lot of nuance conversations
[00:23:19] Joe Michalowski: Yes.
[00:23:20] Russell Jones: that take place. I mean, at one time when we talked about operating plans, Toby wasn’t a big fan because he worried that it would slow down.
[00:23:28] But later on, we just called them investment plans, they were virtually the same thing. And, and he thought that was a, an amazing thing that, that we were creating these investment plans. So that’s just sort of nuance thing that you need to be aware of, particularly when you’re dealing with non-technical people. Like you need to put things in a language that everyone understands.
[00:23:48] Joe Michalowski: Yeah. It’s all about the story that you put together. Just changing the name of something can really make an impact. I think, this really ties back to, we did an episode with Aneal Vallurupalli, the CFO of Airbase. And they were just going through a similar data engineering or data infrastructure project and got a lot of the same insight from him about what it takes to actually,
[00:24:08] you know, quarterback that process, get somebody in place that can move the pieces. And you know what I really liked, he talked about understanding what every like leader’s superpower is. So it’s like, if you are a leader who’s really good at data, like yeah, you can oversee that project maybe more than somebody who came in and their thing is not data and tech.
[00:24:27] Joe Michalowski: It’s more of the relationship-building side of something. And so, you know, finance’s ability to kind of identify where those strengths and weaknesses are and kind of make sure that everybody’s in a position of strength is, is really cool. It’s something that comes up a lot on this episode, on this podcast.
[00:24:42] And I really enjoy hearing those stories.
[00:24:43] Russell Jones: Yeah. And being aware of your own strengths and weaknesses as well, like I would say that my strength is a little bit more on sort of the business side and the operational side and making stuff work. I, I would not put myself as kind of the best technical accountant in the world. And so I made sure I hired one of the best technical accountants in the world,
[00:25:06] ’cause I still, even though it’s not something, uh, that I gravitate to or think I have the best skill, I mean, it’s still part of the job. And so you need to, to make sure that you have the right players in place, ’cause at the end of the day, it is your job to make sure that’s done right.
[00:25:21] Joe Michalowski: Yeah, no doubt. I think this brings us into, you know, every time we’ve talked about scaling finance in the past, I’ve talked about it internally with the finance leaders at Mosaic and with other people on the podcast. It’s always like this three-pronged conversation with like people, process, technology.
[00:25:38] You know, we talked about process, we talked about technology, but you kind of rolled us right into the people side of it. So I, I would love to talk a little bit about how you scaled Shopify’s team specifically. And, you know, I guess I’ll start off, I know I have some, some more specific questions, but broadly,
[00:25:56] what were some of the inflection points where you knew it was time to start adding more resources on the people side to your finance team?
Inflection Points for Finance Scale
[00:26:05] Russell Jones: The first one was I hired an accounting manager because I needed to have someone that could make sure the books got closed correctly. And with that individual and the part-time accountant, we pretty well run ran the finance function for the first couple years. And then I brought in like a manager of financial reporting.
[00:26:24] He started bringing in some more of the accounts payable, payroll people, and things of that nature. And then, when it comes to the specialty roles, one of the first ones was tax. Because tax is, is again an area of its own expertise. And tax is a broad area. So not only is there the income tax side and the compliance associated with that, but I mean, there’s sales tax, which I’ve seen so many times,
[00:26:51] even in my post-life where we hire, or we’re involved in an M&A, and the first thing is, “Well, they didn’t do sales tax, and now you have to go and do all these filings and stuff like that.” And, and you have things like transfer pricing once you’re sort of establishments outside of your local geography.
[00:27:06] Russell Jones: And so that’s quite complex. And you wanna again, I mean, you want, you don’t want to go too far and set up a very complicated international tracks tax structure. If you have no income, that’s gonna be taxed. But you wanna think about that because then maybe, later on, you do an M&A, and where it fits into that tax structure,
[00:27:27] it’s important to get that done right. Treasury is another one. Sometimes the, you don’t have enough cash is not as big a job, but as you sort of start to grow, it becomes a more important one. I’ve seen people combine tax and treasury. I think that’s not a bad way of doing it as well, but at some point getting a separate treasury function is another key.
[00:27:48] And then adding, again, technical accounting people as things get more complex. Then adding someone in terms of an internal audit function is another key one. And again, you know, I wanna do a lot of these well in advance, if you think the, your plan is to go public. Like once you decide to go public, you really wanna go as fast as possible.
[00:28:09] And so you don’t wanna be discovering things at that stage that are gonna slow down the process because there are market windows, and again, it’s just a lot of effort. So, when you decide the answer is go public, go as fast as, as you can on, on that.
[00:28:25] Joe Michalowski: Yeah. You know, gets to show some love for the accounting side of things. I know that’s your background, and they don’t get talked about enough, but for companies that want to go that fast, like you need to have those rock-solid financials in the background. So, I think those were all really good.
[00:28:39] Russell Jones: Yeah, and then just more specific to the FP&A function, like as you create maybe there’s product areas or even a business unit structure, I always like the model where there’s kind of a one-on-one relationship, where there’s an FP&A person sort of a help each of those business areas.
[00:28:59] And those individuals really have to view themselves as kind of a mini CFO/COO for that particular area. So that’s, that’s an important part of that role. And it’s, it’s one where you have to be will, like able to work for two masters, ’cause at the end of the day, you’re still part of the finance team.
[00:29:16] Russell Jones: But if you’re just seen as kind of the person telling finance what’s going on and not providing value, that’s not a, a great position to be in.
[00:29:25] What size was Shopify at when you decided to start adding those specialized FP&A roles? It’s something that comes up a lot, but I don’t know if we’ve ever talked about the specifics of like when that happens. And I know you mentioned the adding new product lines, but I’m curious, like what the timing is?
[00:29:40] Russell Jones: Yeah. And, and I think every company’s a little bit different. If you’re a fairly straightforward company, you have one source of revenue, maybe you only have offices in, in one jurisdiction, you could probably have a more generalist FP&A person. But as you start to build areas, so for like for Shopify, the Shopify Payments area on its own was gonna become a big business.
[00:30:06] The Shopify Capital on its own was becoming a big, big business. And so I think that, the sort of the business itself dictates when is the right time to do that. And it’s not only the, the FP&A functions, but HR should be thinking the same way. Potentially even legal could be like if those businesses are somewhat unique in terms of how they operate, you may wanna not have a dedicated person, but at least someone that, that has their eye on that ball.
[00:30:35] Joe Michalowski: Yeah, it makes a lot of sense. I think, that’s really kind of the crux of a lot of these conversations with finance leaders. It’s like, “Well, it depends on what the business model looks like.” And that’s why this podcast is enjoyable for me to do because I get to ask you guys the questions and see what, what that breakdown looks like for, for your experience.
[00:30:50] So I, so I love that. I think it makes a lot of sense. Where I want to, where I wanna take us next, is kind of digging into your, your specialty. You’re a CPA. You’re the accounting guy who took up the CFO role and got to talk a lot about FP&A today, but I hear a lot of, we’ve had a few accounting leaders on, we’ve had finance leaders on and talking about the relationship between finance and accounting, which from the outside looking in, there is somebody who’s not in a finance role, to me they’re, like one and the same they’re in lockstep. But I know,
[00:31:22] in practice, that’s not as e like that takes fostering. That takes relationship building. So I’m curious, what does strong collaboration look like between finance and accounting? And how as CFO, as the leader of both those departments, do you make that happen?
[00:31:37] Russell Jones: And maybe I’ll start off with, not all accountants make good FP&A, and not all good FP&A make good accountants, or… It’s a little bit of a different skill. And so it is a tricky role, probably trickier to hire the great sort of FP&A leaders that you’re trying to bring into your organization.
[00:31:57] And there, you really wanna get people that are curious, also that they’re data-driven and can sort of help turn strategy into like real results. So I think that’s sort of that skill that you want. And as I mentioned, they have to be willing or able to work for two bosses as well. So again, that’s another one.
[00:32:18] And a lot of the business stuff is a lot more vague than sort of the day-to-day accounting stuff. And so, living in that world where it’s not all black and white is an important part of that. But the way you need to make sure that the two stay in lockstep, we did a few things on that, both at Shopify and in previous lives.
[00:32:36] Russell Jones: One is when we did a review of the monthly results. We made sure that both parties were there. Secondly, when the operating plan was presented, we would have the FP&A group present that to the total finance team. And we would also have the FP&A individuals talk about their business area to make sure that the finance team
[00:32:58] understood that. And part of it is, they’re making decisions that all, that have accounting ramifications, but also the accountants need to know what’s coming down the pipe so they could be thinking about that stuff as well. So that coordination, I think, is key. And I think as CFO because you have both groups, you have to be a little bit of the connection fabric there.
[00:33:21] So if you’re talking to one of your FP&A, people are talking about a new way of billing or something like that. You wanna make sure that the accountants are involved, so they understand that it’s being done right from the sort of the technical side of it. And vice versa, like you wanna make sure that if your accounts are thinking about something that they understand kind the business aspect of that.
[00:33:41] And so I think it’s really, again, like most things, just getting people in the room and making sure that the flow of information is working properly there.
[00:33:53] Joe Michalowski: Yeah, I think all great points. I think it’s really, you know, two sides of, of a coin that’s working toward the same end, that probably kind of weaves in and out. It’s nice to hear you talk about how you make that communication happen because there’s definitely a lot of blurred lines. Like there, there is that, you know, FP&A looks forward, accounting looks backwards, but there’s a point in the middle where they need to like do that handoff and that is never such a clear line.
[00:34:19] So, you know, cool to hear you talk about how…
[00:34:21] Russell Jones: I think that’s called the presence.
[00:34:24] Joe Michalowski: Exactly, exactly. You know, I, I wanna roll this into kind of one, one last question on topic that really goes back to what we talk about at Mosaic a lot. Because I think what you’re talking about with finance and accounting rolls in nicely here. And we talk a lot about this concept of strategic finance. And it’s really just how finance can be seen as a true strategic partner, and not just finance, but also accounting.
[00:34:51] And so I’m wondering if you could just sum up what you feel the modern finance and accounting team strategic role is in a high-growth company, similar Shopify?
[00:35:02] Russell Jones: And I think you guys said it right, like it has to be a strategic function. And even if it’s not growing, sometimes something that’s shrinking, you need to be as strategic to figure out sort of where to do cuts and stuff like that. I think finance in general, really needs to view themselves as sort of business partners and creative problem solvers.
[00:35:25] I mean, yes, there’s a policing function that needs to be done, and you need to make sure that things are going off the rail, but I personally find it like more rewarding if the finance team is also helping to, to grow the business. And just to give you a bit of example there, like the, the original product manager for Shopify Payments is someone I hired and who reported to me for the, the first year. And Shopify Capital, because it was very nature, had a heavy finance involvement there. And those are examples where finance can actually really help grow the business.
[00:35:59] And so I encourage all finance people to really have that broader perspective. And don’t be afraid to step outside of the defined accounting side of the business, ’cause you really do have a skill set that can help grow the business. And, and certainly, my view is that’s that can make the job a lot more interesting as well.
[00:36:25] Joe Michalowski: Yeah, I think, I think it’s a great point. I love, I love getting to ask the question just about what strategic finance means to different people. Like we, we have our own thoughts and I think everyone gets to the same idea, but always really interesting to hear, you know, what that looks like for, for other companies
[00:36:40] and, and you know, how it looks like in practice. So, really appreciate the examples for sure. I know, we’re coming up on the end of our time, so I want to ask one final question. I think it rolls in nicely with kind of like the summation you just left us with, but it’s something we ask everybody. It’s selfishly my favorite question because I think it extends beyond just finance and accounting,
[00:36:59] but what is something you know now that you wish you knew at the start of your career?
Finance Career Advice from Russ Jones
[00:37:03] Russell Jones: There’s lots of those. So maybe I’ll start with a little bit of perhaps just being a bit more patient. I think kind of as sort of finance-driven people, you wanna get the a personality, get job done and stuff like that. But one of the sayings I like the best that I use quite a bit is, “It’s never as good or as bad as it first appears.”
[00:37:28] So, so I think that’s kind of stay somewhat grounded and, and don’t get overly excited on the highs or overly down on the, on sort of the negative side of that. But also like, I think again, as people sort of evolve in their careers and I think the importance of developing people and leveraging people. I think,
[00:37:51] probably in the early days, it was like, “Oh, I can do it myself so much faster. Why would I do that?” But it’s all the, you don’t scale either yourself or the, or be able to scale with a company if that’s your approach. And one of the things that I kind of would think about as part of this is that if I was in a meeting with a group,
[00:38:14] I kind of assess at the end, like, “Did I add oxygen to the room or did I suck it out of the room?” But I think that’s an important lesson learned over time. Like if you can sort of motivate and sort of influence people to do something or, and really lots of times stuff that they didn’t think they could do,
[00:38:34] that’s a pretty powerful outcome on that. And then maybe the last one I’ll, I’ll leave you with is, there was a, this is what Toby saying that I really thought was quite good. It’s that he wanted people with strong opinions weekly held. And so, like he wanted you to come into the room with an opinion about something, but if you’re in the discussion, there was a better way of doing it.
[00:39:03] Russell Jones: Then he also wanted you to change to that better way and not be so fixed in that sort of starting position. So I think that’s another one that, I don’t know, maybe people are thinking of aspiring to hire roles in their finance organization would be a good one for them to keep in the back of their mind.
[00:39:22] Joe Michalowski: I think those are all great. I think people are fortunate to have someone who’s been in the positions you have looking back and thinking about these things. I really like the adding versus sucking oxygen out of the room one, ’cause, you know, it’s similar, I think finance has a reputation similar to like HR, where like, if they show up in a room unexpected, like everyone’s kind of like on edge.
[00:39:42] And I know, uh, my wife works at HR, so I know her goal is always to go into rooms and like put people at ease and like not have that happen. And I think, you know, to your point, same thing for finance people. It’s like if you come into that room and that doesn’t happen, you’re probably succeeding on the relationship-building side of things.
[00:40:00] So I think that’s a, all really great points, but I really liked that one. That was cool.
[00:40:03] It’s the opposite of, “I’m here from corporate. I’m here to help.” Right?
[00:40:07] Joe Michalowski: Yeah, exactly, exactly. Such a good point. Cool. Well, I know, uh, I wanna be respectful of your time. Really appreciate you coming on, but I want to open the floor to you. Where can people go to connect with you, to keep up with the work that you’re doing now? I know you’re on boards. This is your time to plug anything that you’ve got going on or any companies that people should check out because you’re involved with them.
[00:40:27] That is obviously a good thing we’ve found, so.
[00:40:31] Russell Jones: I think, just as, again, as people evolve in their careers, being open to sort of constant learning and constant new ideas I think is, is a great way to sort of think about developing your yourself. And now, like I said, I’m on boards, where I’m a chairman of one board. On another board, I head up the audit committee and so,
[00:40:53] there is life beyond sort of working full time in a company. And so, particularly as you get later in, in your career, it’s you probably wanna start thinking about what’s my next sort of chapter that I wanna do. Because from being sort of CFO of a fast-growing company to doing nothing is probably, uh, a difficult thing to sort of hit the brakes that fast.
[00:41:15] So having a nice sort of way of evolving into things is, is good. I’m on LinkedIn, but I’m not sort of a major sort of contributor there. And on social media, I kind of leave most leads to my wife. So I’m not…
[00:41:29] Joe Michalowski: It’s probably for the best. To be honest, it’s a, a hellscape out there sometimes. So it’s probably a good idea.
[00:41:35] Russell Jones: But I’m always open to a conversation. Like if a company’s, like I’m on the one of the things that I’m, I am involved I’m on the advisory board of a fairly large Canadian VC. And I help them build their finance community and present it and that.
[00:41:51] And so, always interested in sort of helping finance people evolve to the next level.
[00:41:58] Joe Michalowski: Cool. Love to hear it. Well, Russ, thank you again so much for, for joining. I think this is gonna be a really good episode. And yeah, just appreciate you taking the time out of your day. I know you’re staying busy even in your post-Shopify years, so, uh, yeah, just great to have you on The Role Forward, and hope we can do it again sometime.
[00:42:16] Russell Jones: Uh, my pleasure. Thanks, Joe.
[00:42:17] Joe Michalowski: All right. Thanks, Russ.
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