पाठशाला Pathshala · संचालन Sanchālan, Operations · Lesson 13 · Build

The finance function: from CA to finance head to CFO

A finance function grows in four stages, and each is defined by the job that has stopped getting done. Hire for that job, in that order, and the CFO arrives when capital becomes a weekly decision.

Pathshala, The Founder Library · 11 October 2026 · 8 min read

Metal staircases crossing one another on the outside of an industrial building in Tokyo. — Photograph: Karolina · Pexels

Founders tend to hire finance people in the wrong order: a CFO title too early because it reads well in a deck, an accountant too late because the books seemed fine. A finance function grows in four stages, and each stage is defined by the job that has stopped getting done, not by the size of the last round.

This lesson sets out the four jobs a finance function does, the four stages it passes through in an Indian startup, the signals that move a company from one to the next, what the Companies Act actually requires, the two hiring errors that cost the most, and a quarterly check that tells a founder which role to hire next.

The four jobs a finance function does

Every finance function, from a two-person company to a listed one, does four jobs. Record: keep the books, reconcile every account, close the month. Comply: file GST, TDS, PF and ESIC, the annual forms with the Registrar, and support the statutory audit. Report: turn the closed books into the MIS, the board pack and the investor update. Decide: build the plan, price the product, manage cash and raise capital. The first two can be bought from outside for a long time. The last two cannot, past a point, because they need someone who sits in the company’s meetings and knows why the numbers moved.

The stages below are simply the order in which these four jobs move inside the company and get a full-time owner. Each move happens when one job starts slipping: the close runs late, a filing is missed, the investor pack takes a founder’s whole weekend, the plan is rebuilt from scratch before every board meeting. The slipping job, not the funding stage, tells a founder what to hire.

Stage one: a CA firm, a bookkeeper and a founder who reads

From incorporation to the first few crore of revenue, an outside CA firm runs the filings and a bookkeeper, in the firm or part time, keeps the ledger. The founder owns report and decide. This is not a compromise; it is the right shape for a company whose finance work fills a few days a month. The law already names who answers for the books: section 128(6) of the Companies Act makes the managing director, the whole-time director in charge of finance, the CFO or the person the board has charged with the duty punishable with a fine of ₹50,000 to ₹5 lakh if the books are not kept properly. In a company with no CFO that person is a founder.

The test of stage one is the monthly close. Treelife’s month-end checklist for Indian startups puts the median close at twelve to eighteen working days and argues that five is achievable with a good bookkeeper plus a CA who understands the Indian compliance calendar. The routine is set out in the [bookkeeping lesson](/library/bookkeeping-from-day-one). A founder at this stage outsources the doing, never the knowing: the pack arrives on day five and the founder reads it that day.

Stage one breaks in recognisable ways. The close slides past day ten. Receivables over sixty days have no owner. The founder rebuilds the financial model before every investor meeting because the last one was never updated. Invoices go out late because nobody in the company raises them. Each of these is a record or report job slipping, and the fix is not a better CA firm.

Stage two: an accountant in-house and a finance lead part time

The second stage usually starts in the run-up to a priced round, when investors will ask for monthly management accounts and a plan they can hold the company to. Two hires make it. An accountant on the payroll takes over the daily record work: payables, receivables, invoicing, collections, reconciliations and the five-day close. The CA firm keeps tax, filings and advice. A fractional finance lead, often a CA who works with several startups, owns the [operating plan](/library/forecasting-and-annual-operating-plan), the [monthly MIS](/library/monthly-close-and-mis-report) and the data room. Treelife suggests a fractional CFO for startups raising a Series A or handling more than ₹2 crore of monthly transactions, and describes the role as owning the variance review and the management pack and catching structural errors such as TDS deducted at payment instead of accrual and missed reverse-charge GST.

Hands holding a calculator and a stack of folders against a brick wall. — The first finance hire who matters is the one who closes the month. The plan and the investor pack can stay part time for a while longer. Photograph: Mikhail Nilov · Pexels

The accountant is the more important of the two hires and the one founders delay. Hire someone who has closed books in a company rather than only audited them, who is fluent in the accounting software the company uses, and who will treat the bank reconciliation as a daily habit. Ask in the interview for the calendar of the last close they ran and what slipped.

Stage three: the finance head

The third stage arrives when the work outgrows part time. The signals are concrete: a second legal entity, such as an overseas parent or a subsidiary; a lender with covenants to report against; headcount near a hundred, with payroll, reimbursements and ESOPs to account for; revenue recognition that needs judgement, such as multi-year contracts or implementation fees; an audit that produced findings; or a founder spending more than a day a week on finance. Any two of these together means the company needs a full-time head of finance, usually a chartered accountant with experience of running a close and an audit in a growing company.

The finance head owns the machine: the close, the compliance calendar, the [internal controls](/library/internal-controls-and-fraud-you-did-not-expect), the [statutory audit](/library/first-statutory-audit-made-painless), treasury, the plan and the quarterly reforecast, and the board pack. A team of two to five sits beneath: accountants, payables, receivables and payroll. The title matters less than the scope. Many companies hire a strong finance head, call the role head of finance or VP finance, and let the title grow when the job does. That is cheaper and kinder than hiring a CFO who spends a year doing a controller’s work.

Stage four: the CFO, and what the law requires

A CFO’s job faces forward and outward. Capital structure, equity and debt raising, banking relationships, acquisitions, investor relations, the plan as a statement of strategy rather than a spreadsheet, the board’s audit committee and, eventually, readiness for a listing. A CFO is the CEO’s partner on how capital is allocated. The signal for the hire is that these questions now take a founder a day a week, every week, and will for years.

The law sets a floor, not a timetable. Under section 203 of the Companies Act read with rule 8 of the managerial personnel rules, every listed company and every other public company with paid-up share capital of ₹10 crore or more must have whole-time key managerial personnel, including a CFO. A private limited company is not required to appoint a CFO at any size. It does have one related duty: since 1 April 2020, under the amended rule 8A, a private company with paid-up share capital of ₹10 crore or more must have a whole-time company secretary. Paid-up share capital counts the face value of shares issued, not the premium paid over it, so a startup that has raised large sums at a premium can remain well under the threshold. For most private startups the CFO is a business decision.

Move the sliders and the pattern is plain. Revenue alone moves a company slowly up the ladder; a second entity or a round on the horizon moves it at once, because each brings reporting that someone must own. The figure is a starting point for the conversation with the board, not the conclusion.

An illustrative Bengaluru software company. In its first eighteen months it has eight people, revenue under ₹1 crore and a CA firm that closes the books by the seventh; a founder reads the pack and keeps the model. In year two it reaches ₹4 crore of annual recurring revenue and thirty-five people and starts preparing a Series A for the following spring. It hires an accountant who brings the close to day five and a fractional finance lead who builds the operating plan and the data room. In year four, at ₹40 crore of revenue, 140 people and a new US subsidiary to sell overseas, the fractional lead cannot keep up with two sets of books and a transfer-pricing question, and the company hires a full-time head of finance with a team of three. In year six, raising its third round alongside venture debt and with a listing on the board’s agenda, it hires a CFO, and the head of finance stays to run the machine. At no point did the law require any of these hires.

Hire finance people for the job that has stopped getting done, not for the round that has just closed.

The two errors, and how the interview avoids them

The CFO hired too early. A senior person joins a company with no accountant, no close and no plan. Either they spend a year doing bookkeeping at a CFO’s salary, or they build investor slides on top of books that do not reconcile. Both outcomes end in a departure and a reconstruction. The accountant hired too late. A founder reconciles the bank at midnight for two years, the close drifts to the twentieth, and the first diligence call finds deferred revenue nobody recorded. The second error is more common and does more damage, because it is invisible until an investor or an auditor looks.

The interview should test the job, not the CV. For an accountant, hand over a messy month: a trial balance, a bank statement and a gateway settlement report, and ask for the reconciliation and the questions they would raise. For a finance head, ask them to walk through the last statutory audit they ran, what the auditor found and what they changed afterwards, and take a reference from that auditor. For a CFO, ask for the capital plan they would write for the next three years and the first three things they would change in the finance team. A candidate who cannot do the work of the stage below will not be able to run it.

The quarterly finance-function check

Once a quarter, the CEO answers five questions in writing. Did the books close by the fifth working day every month this quarter? Was every statutory filing made on time, with no late fee or interest paid? Did the MIS reach investors by the tenth? Is the operating plan less than a quarter old, and was the last reforecast done from drivers rather than rebuilt? How many hours did a founder spend on finance work that someone else could do? Any answer that fails two quarters running names the job that is slipping, and the stage above names the person to hire for it. Put the check on the calendar for the second week after each quarter closes, and take the answers to the board.

Nothing here is legal, tax or investment advice. The company in the worked example is illustrative; the Companies Act provisions are stated as checked on 11 October 2026.