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Does the vision for growing your start-up from infancy to established firm include the finance
department? If you said no, you’re not alone. Most start-up owners have a vision for the company but not the finance team, yet, it’s important to be thoughtful in how that function is built out.
The financial needs of an early-stage start-up and after its first or second round of funding are very different and still require some of the same skills and characteristics. Team members must be flexible, adaptable, nimble, agile and forward-thinking. Finance and accounting professionals should have experience in that industry, hopefully working with other start-ups, and a strong grasp of Generally Accepted Accounting Principles (GAAP).
Since checking all those boxes with one or two internal hires is usually next to impossible, many start-ups turn to outsourced finance professional for better leverage. Scaling up a finance team the right way adds value, maximizes internal resources and preps the company for growth.
At First …
Accounting is the building block of a solid start-up financial team. Even before the first round of funding is secured, focus on clean, accurate books and records. Often it’s more advantageous to begin with a contract-based accountant. This role can perform clear and simple deliverables that can pay dividends in scalable growth later, like:
Constructing and maintaining basic financial statements
Organizing and managing accounts payable and receivable
Implementing processes and controls for basic financial functions
These tasks will end up making the start-up more attractive to potential investors, plus the process of securing capital through more traditional means will probably be easier. Everyone loves a good book, especially when it’s a clear, accurate reporting of a start-up's financials.
But there’s more to it than that. In the beginning, the main goal of the finance and accounting department is generating revenue. That means going above and beyond constructing books and records and analyzing data points and financial benchmark to apply those insights to company performance. Think a bookkeeper with a few years of experience will be able to handle that? Probably not.
As more is needed, the finance and accounting department must evolve.
And Then …
Maybe the company is applying for funding or recently secured VC backing. At this stage the financial needs change and the team has to be ready to upskill. Going from start-up to scale-up, the goals will shift from compliance to consulting. To do that, teams need to add value without adding to the headcount. A quality financial partner can leverage resources and contribute to overall strategy.
In addition to accounting skills, team members must have a mind for business, strong analytical skills and enjoy working with people. A CPA who enjoys working with people? Yes! Because this role needs to inform, educate and influence senior leadership and possibly board members and/or investors. A quality partner acts as the financial captain of the ship, steering it towards growth.
After That …
As a start-up company grows, the accounting team also must scale up. Upskilling is one piece of the puzzle. It’s also worth noting that the specific roles need to change. Early on it’s perfectly fine to lean on an accounting generalist. As the company grows, though, it will become even more important to identify and hire specialist roles that add structure and expertise to the team. Since this can be hard to do in one or two people, especially at this stage, it’s wise to consider outsourcing specific, functional roles, be it M&A, VC, IPOs, or something else.
Also Consider …
Building a better financial team requires a few extra things, like:
Insight and ability to answer complex questions that aren’t just about finance and accounting
An understanding of how their role affects the overall business, and what opportunities or risks should be considered
Knowledge of what data to use and how to use it to find better insights
A start-up's story is always being written. Having a reliable, forward-thinking finance and accounting team is crucial to short-term wins and long-term success. Most companies, as they grow, will end up employing a mix of internal and external finance talent. This hybrid approach can work well and help the company scale up, anticipate changes and seize opportunities.