Financial governance covers approval workflows, spending limits, segregation of duties, a complete audit trail and alignment with the accounting standards. In a growing company the binding constraint is rarely the framework itself. It is whether anyone senior enough owns it.
What financial governance covers
Three things, in practice. Rules that set who can approve what, up to what limit, and which duties must sit with different people so no single person can both create and pay an obligation. A complete, retained audit trail of transactions and of the exceptions to policy. And reporting that meets the applicable standards.
In Australia the outer boundary is statutory rather than optional. Directors carry personal responsibility for the financial reports their company produces, which ASIC sets out directly, and the underlying duties sit in the Corporations Act 2001. The AICD's financial reporting guidance is the practical companion most Australian boards use. Recognition and measurement come from the AASB accounting standards.
Why governance falls behind in a scaling company
Not through negligence. A classic problem for rapidly scaling businesses is the finance function getting left behind, failing to develop the maturity and controls that accelerated growth requires.[1] The company that ran on a founder's judgement at fifteen people is still running on it at eighty, and nobody chose that. It simply never became urgent enough to fix.
It is also not what the first finance hire is optimised for. In early-stage companies that person is primarily a problem solver with a finance lens, focused on getting things done, and picking up legal and compliance tasks along the way.[2] That is the right profile for that stage. It is not a control framework, and one does not emerge from it as a by-product.
The place the gap usually surfaces first is a month-end close that keeps getting longer.
Hiring for controls, and the trap on the other side
When a company hires to close the gap, the brief is usually explicit. On one search the primary reason for the hire was to ensure financial controls and financial reporting were really clean, with process improvement around systems, data and projects as the secondary focus.[3] That ordering matters. A controls hire and a transformation hire are different people, and a business that needs the first and buys the second gets neither.
The trap is on the other side of it, and it is the part founders underestimate. On a CFO replacement I worked on, the previous incumbent's strength in financial controls, governance and compliance was no longer aligned with the next phase of the business, which led to a mutual understanding that they would move on.[4] On another, a CFO departed on good terms after five years having successfully improved financial controls and governance, and the business then wanted a different profile for its growth phase.[5]
Read those two together. Both people did the job well. The requirement changed underneath them. The ideal CFO for a growth phase is a commercial person focused on growth and outcomes rather than compliance, who can help drive towards an IPO or an exit.[6] That is a different animal from the person who built your delegated authority matrix, and pretending otherwise is how a good hire ends badly.
| Phase | What the business actually needs from governance | |
|---|---|---|
| Early stage | Founder judgement plus an external accountant | Enough control to keep the record clean and stay compliant. The first finance hire is a problem solver with a finance lens, not a control framework. |
| Scaling | Financial controller or Head of Finance | Delegated authority, segregation of duties and a real audit trail, built deliberately. This is where the controls-first hire earns its keep. |
| Growth or pre-exit | CFO | Governance held to standard while the emphasis moves to growth, outcomes and transaction readiness. A different profile from the person who built the controls. |
Governance is broader than finance
At CFO level the remit stretches past the ledger. Beyond the finance skills, a key requirement can be a commercial skill set and personality that lifts commercial acumen across the whole business, taking in revenue, legal and the governance of risk.[7] That is why a candidate with COO exposure can be strong on a CFO brief: it often brings broader operational experience across legal, compliance and people, beyond a pure finance track.[8]
The newest piece of that remit is AI. As AI starts recommending financial actions, finance leaders will need to reassess where human oversight sits in relation to liability and risk governance.[9] That is a governance question before it is a technology question, and it belongs on the same page as your delegated authority.
The oversight side of that is covered in the real disadvantages of AI in finance.
Common questions
What is financial governance?
It is the set of rules, controls and oversight that decide how money is approved, recorded and reported. That covers approval workflows and spending limits, segregation of duties so no one person both creates and settles an obligation, a retained audit trail of transactions and policy exceptions, and reporting that aligns with the accounting standards. In Australia the outer boundary is statutory: directors carry personal responsibility for the financial reports their company produces.
Who is responsible for financial governance in a company?
Ultimately the board, because directors carry personal responsibility for the financial reports. Operationally it sits with the most senior finance person, usually a financial controller or Head of Finance in a scaling company and the CFO once there is one. In an early-stage business it tends to sit nowhere in particular, because the first finance hire is a problem solver focused on getting things done rather than someone building a control framework.
When does a startup need real financial controls?
Earlier than most founders act on it. The pattern I see is a finance function getting left behind in a rapidly scaling business, failing to develop the maturity and controls the growth required. Founders usually notice it in one of two ways: no longer being able to personally sight every material commitment, or a month-end close that has quietly stretched from days to weeks. Neither of those is dramatic, which is exactly why they get deferred.
Can the same CFO handle both governance and growth?
Sometimes, but do not assume it. I have run two searches where the previous CFO had genuinely succeeded at improving financial controls and governance, and the business then needed a different profile for its next phase: a commercial person focused on growth and outcomes who could help drive towards an IPO or an exit. Both people did the job well. The requirement changed underneath them, and that is a hiring question rather than a performance one.
References
- A classic problem I see in rapidly scaling businesses: the finance function gets left behind, failing to develop the maturity and controls that accelerated growth requires.
- What the first finance hire actually is in early-stage companies: primarily a problem solver with a finance lens, focused on getting things done, including legal and compliance tasks.
- From a live brief: the primary reason for the hire was to ensure financial controls and financial reporting were really clean, with process improvement around systems, data and projects as a secondary focus.
- From a CFO replacement search: the previous incumbent's strength in financial controls, governance and compliance was no longer aligned with the next phase of the business, which led to a mutual understanding that they would move on.
- From another search: the previous CFO departed on good terms after five years, having successfully improved financial controls and governance, but the business then sought a different profile for its next growth phase.
- How I describe the ideal CFO for a growth phase: a commercial person focused on growth and outcomes, not just compliance, who can help drive towards an IPO or exit. Tom interviewed a CFO who had been through three failed IPOs and a trade sale on The CFO Track.
- What clients ask for beyond finance skills: a commercial skill set and personality able to uplift commercial acumen across the entire business, including revenue, legal, and the governance of risk.
- Why I look at COO backgrounds on a CFO brief: the role often provides broader operational experience, including legal, compliance or people functions, beyond that of a pure CFO track.
- My view on where this is heading: as AI starts recommending financial actions, finance leaders will need to reassess where human oversight sits in relation to liability and risk governance.