The Finance Team Your High-Growth Startup Needs

What's The Importance and Role Of A Finance Department In Your Startup?

In recent years, the finance team's position has changed from a classic back-office scorekeeping function to a more strategic partner in decision-making.  Understanding the fundamental duties of the finance operation is the first step in creating contemporary finance roles. These tasks fall into a few primary areas that can determine your finance department structure. The role of the finance department is listed below:

Linking Data Across The Organisation

Due to their location at the confluence of all financial and operational data, finance departments have the ideal vantage position within an organisation. Creating an intentional data architecture to keep complete visibility of the numbers is one of its key responsibilities.

Proactive Preparation And Growth Guidance

The forward-looking aspect of finance's responsibility has been financial planning and analysis (FP&A). A contemporary strategic finance department uses data-driven planning to connect predictions to actual business impact while maintaining agility with rolling forecasts.

Analysis Of Performance And Accounting

Without consistently performing a month-end closure procedure and maintaining historical data integrity, finance cannot be a forward-thinking strategic partner. This is the traditional "trust, but verify" aspect of finance's job for which the accounting manager is responsible.

The role of a finance department encompasses a wide range of duties, including risk management, investor relations, ensuring security and compliance in the numbers, working with corporate executives to make strategic decisions, and serving as the CEO's right-hand partner. However, the three high-level categories encompass the most variety of core responsibilities.

Functions That A Finance Team Has

The structure of a finance department will consist of the following finance roles: 

Accounts payable 

The accounts payable team of a financial department needs to manage the cash outflows to clients. Any delays could result in delay in operations and hinder the company’s workflow. 

Accounts receivable 

The accounts receivables team of a financial department handles aspects such as vendor payments, debtor payments, payments from clients, etc. This is important to manage money that is coming into the business so that payments can be made on time. 

Corporate treasury 

The corporate treasury department organises the firm's liquidity, finance, capital, and financial resource allocation to support the overall business strategy.

Financial planning and analysis,

Planning and budgeting, integrated financial planning, management and performance reporting, and forecasting and modelling comprise the collection of four tasks known as financial planning and analysis (FP&A). This team and finance role is important to support an organization's financial stability.

Payroll management

The administrative responsibility of paying staff for services provided. Additionally, it offers a financial record of the employee's gross pay, payroll deductions, net pay, and the associated payroll tax burden for the employer.

Tax

All tax-related obligations are a financial department’s responsibility. To pay taxes on time, you need to have a robust tax team that is well-versed with regional and international tax laws, as applicable. A glitch in tax payments can result in heavy fines and charges from the government. 

Executive functions

Within finance divisions, finance roles such as Chief Financial Officer (CFO) and Chief Risk Officer (CRO) fill executive positions. In global enterprises, business units designate deputy CFOs who answer to the organization's CFO. When determining the future course of their organization, CFOs give the CEO helpful information.

The Finance Team Structure At Different Growth Stages

Although there is no one-size-fits-all finance team structure – several standards and benchmarks can be used to determine how many roles develop over time.

Early-stage

Your finance team is only starting to take shape, so you need to think of the structure of the finance department. You might have a solo financial department with a Head or Director of Finance collaborating with the CEO and $1 million to $10 million in annual revenue. To do ad-hoc analysis for growth planning and board meetings, you are just beginning to develop the first financial model and thoroughly understand how the business operates.

Mid-level stage

Your finance team becomes a little more experienced at $10 million to $50 million in revenue. You might recruit a financial controller, an analyst, or someone to bring bookkeeping and accounting in-house as one or two more full-time positions.

Growth stage

You need to start putting financial operations in place for a prospective IPO run. You're hiring more analysts to build a team of ten people, which might include more senior leadership positions like chief accounting officer, vice president of strategic finance and FP&A, and vice president of corporate and financial strategy.

Full-maturity stage

Your finance staff must mature to its full potential once you've reached the enterprise level or gone public. This involves assembling a finance team of at least ten individuals, including analysts with various departmental specializations and a full complement of financial leadership positions.

When To Begin Hiring A Finance Team?

The first stage in building your finance team is identifying the turning points when your principal obligations become too much for you to handle alone. The ideal time to make a team investment is before these tipping moments become apparent. Some things might push the necessity for financial investment into sharp relief. Aiming to increase the finance personnel in front of a problem would be beneficial.

There are two better approaches to deciding when to invest in the right finance team structure, neither of which necessitates waiting for a problem to arise.

Recognize when you are caught in a cycle of excessive reactivity

You want your finance team to constantly be able to assist the company—to proactively get in touch with department heads and serve as strategic consultants. It's time to enlist some assistance if it's been a while since you were able to concentrate on tasks like product planning, boosting net revenue retention, or shortening the sales cycle.

Speculate on the financial impact of the company's growth goals

As a business expands, you have to deal with increasing amounts of financial data, more intricate business procedures, and a want for more powerful technologies. It can include automating more business procedures so that tasks like planning and financial reporting go much more smoothly. Hire for different finance roles in advance to give your team enough time to handle the increased complexity without falling behind.

What To Look For When Hiring Talent For Your Finance Team

You must actively seek out the ideal candidates to grow your finance team and should not simply wait for them to apply after seeing a job posting. Determine the appropriate finance professionals for the position, and then strive to hire those with a history of success.

Consider the following qualities when selecting professionals for your financial team:

The Capacity To Work Independently

You want the early finance hires you to make to be independent. Without the interference of finance leaders, they take charge and solve problems as they arise. World-class finance professionals may embrace the generalist role and support the business wherever needed by having an entrepreneurial mentality and improving finance operations. 

An Openness To Working Together

Early financial recruits will be essential team members in scaling processes. This person must collaborate with other business executives and build inter-departmental relationships to develop systems that will hold up to the strain of rapid expansion.

Knowledge Of Automation Process

To stay lean and efficient, startup finance teams automate as many monotonous monthly/quarterly reporting components of the work as they can. You can automate your bill payments, invoice creation, and even streamline your accounts payable process with the right tools. Ask prospective candidates in finance if they have experience with finance automation that can improve your finance operations. 

How To Choose a CFO?

Don't put off deciding how to manage the finances of your firm. Hiring a CFO can develop your accounting and finance team and significantly impact your startup's capacity to realise your goal.

Either a CFA or CPA qualification

Although an MBA is a solid foundation, the individual might lack the expertise in growth firm accounting or tax required to manage your company's finances.

Fundraising knowledge

Do they have prior experience raising venture capital? Do they have a vast network of connections they can reach out to ask if they would be interested in participating in a round of equity financing?

Deal flow history

Deal flow measures how frequently commercial and investment proposals are received.

Team Building 

Startups must be quick-thinking and agile. To improve efficiency, a startup CFO should know how to manage teams efficiently so that the organisation can function smoothly. 

3 Responsibilities The Finance Team Must Fill

Here are some finance organisational structure best practices to follow: 

Management Of Time

Finance moves quickly. There are occasionally pressing deadlines where numerous chores must be finished ahead of time. Board meetings, end-of-quarter, and end-of-financial-year (tax) events, AGMs, regulatory and policy changes, board meetings, and the release of business reports are some examples (interim and annual). Operating under pressure and excellent time management abilities will set you apart.

Communication

The finance team's communication is vital in any company. It is a bridge between clients' satisfaction and the company's goodwill. They must keep everyone informed about the numbers. They must interact with coworkers, investors, and other stakeholders who might not be familiar with money. The staff must have excellent diplomatic and communication skills, especially when communicating problems like budget cuts or declining stock values.

Operations Management & Automation

To increase efficiency, the financial department must significantly contribute to the purchase, maintenance, and updating of cutting-edge operations. 

Automating different tasks or digitising some organisations' systems must be part of systems changes. The team must look up to any automation required for the company's growth. 

Conclusion

Consider your finance team's duties and determine the abilities needed to carry them out when you decide on a finance department structure. Next, choose the team member who is best suited for the job. Typical responsibilities stated above can organise your team. Don't forget to give your financial team the tools they need to succeed in their task.