As a former part time CFO I’ve been following the sudden demise of Zirtual with great interest. If you haven’t been following along, the company shut down last weekend with no warning. The founder blames her part time CFO, Ryan Keating. Here’s my take:
Whether you hire someone full time or part time, you can delegate but should never abdicate responsibility. Zirtual’s founder says her company failed because her part time CFO failed to forecast 3 payroll periods instead of 2 in a month. That’s BS.
I will say that if you take on the CFO title, even part time, then you have a fiduciary duty to the company. So you have accountability. I certainly felt like I was a part of all the companies I served when I was doing this work. So, if he screwed this up, that is unfortunate and should not have happened. Payroll is always a company’s largest expense. And it’s the most predictable. No excuse to screw that up.
But, even if he did make that mistake the CEO and the board should never have allowed the company to run so tight on it’s cash that this mistake would cause them to fail. That is irresponsible management and governance. And even with a part time CFO, the CEO has the ultimate responsibility for managing cash.
I think the failure here is a bigger story. If Zirtual’s investors believed in the business they would have bridged the company. So, the business itself was likely not working.
One final cautionary note: Zirtual raised it’s one and only funding round from a group of 13 investors. So, likely no single investor had enough of a stake to bother keeping close tabs on the company. And similarly, no single investor stood to lose much from its failure. Always better to have committed investors with a meaningful stake than a party round with a bunch of shiny names (Zirtual’s investors included Jason Calcanis and Tony Hsieh).
Definitely some cautionary lessons for us to all to learn from this one.