REALWORLD FOUNDER LESSON #4
Make sure everyone knows who is allowed to spend what, when and with whom - or your money will disappear down the tracks like a runaway freight train.
In the very early days of a startup, founders tend to make almost every decision themselves.
You know the budget. You know what is in the bank.You know what can be delayed and what cannot.
Then the business grows.
Managers arrive. Teams get budgets. Suppliers multiply. Purchase orders increase. Decisions happen faster.
And suddenly, you're being asked to sign off on off-budget expenditure you weren't expecting.
Spending authority becomes a governance issue.
What happens when a manager exceeds their approved budget?
What happens when you, as founder or CEO, commit the company to expenditure outside the approved budget?
Who can approve it? Who should approve it?
At what level is board approval necessary?
And what happens if nobody asks before the money is spent?
That is how you can end up with an uncontrolled spending freight train — and a cash runway that shrinks at a frightening rate.
For an investor or funder, that is a serious warning sign.
They are trusting management to spend their capital responsibly.
Repeated budget overruns, unclear approval limits or retrospective requests for approval quickly undermine that trust.
One of the simplest governance documents an early-stage company can put in place is an Authority Matrix — or Delegation of Authority.
It does not need to start as a complicated document.
It can simply define:
Who can approve expenditure?
Up to what amount?
What happens if the expenditure is outside the approved budget?
What requires CEO approval?
What requires board approval?
Who can sign certain contracts or commit the company to future expenditure?
And critically:
No approval should mean no commitment.
As the company grows, the matrix can become more sophisticated — covering procurement, hiring, contracts, banking, capital expenditure and other financial commitments.
But the principle remains the same:
People should know exactly where their authority begins — and where it ends.
My lesson?
Put an Authority Matrix in place early and have it approved by the board.
It protects the company’s cash.
It protects you. It protects managers from making decisions they were never authorized to make.
And it gives investors and directors confidence that there are controls on how their money is spent.
Good governance is not about slowing founders down.
It is about making sure growth (or perhaps unbridled enthusiasm) does not outrun financial controls.
Download this comprehensive Authority Matrix to get started.
Have an awesome day now!
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