, ,

Startup Finance Has a New Advantage: A Full Stack CFO Team

Every VC-funded startup craves efficiency. They need to push forward as quickly as possible, and they need to get their finance and accounting up and running, too. Growth is the ultimate quest, and complexity builds up fast. The goal is to establish a smart finance foundation easily and efficiently, and sometimes that means outsourcing strategic CFO and controller expertise and financial operations to get just what you need at this time. This becomes the full stack CFO team, with all levels of strategic advisory and everyday accounting to keep the finances rock-solid.

If the startup lacks a fully formed finance function—if they don’t have the resources, expertise, and skills needed—there’s a risk of missteps, decisions made on false data, and hindered opportunities for growth. Milestones won’t be met. The VCs who are backing the company are going to notice. And tough decisions will have to be made.

There’s sometimes a false assumption at those companies that it’s not important or that not all the layers are needed just yet, or that full-time positions are the only way to make it work. For those companies, the finance function starts out meekly, perhaps with a junior accountant who mostly processes and records payments. A hole builds up within the business: Management lacks visibility into what’s really going on—how it’s performing, how to manage the cash, how to know with certainty what the next move should be.

When the finance function does receive the attention it deserves, the growth momentum can keep moving ahead. A finance function with all the layers in place and accessible—that has a full stack CFO solution—differentiates fast-moving, dynamic early-stage or emerging growth companies from the pack.

Elevating the Finance Function

It is possible to fill out the finance function in a more flexible, and effective, way as a fast-growing company’s needs evolve and as milestones are met. It does not have to look the same from one day to the next. Specialized skills and expertise are combined for a scalable solution that meets the company’s exact needs, on an ongoing basis.

Smart companies know that every layer of the finance function matters—from CFO-level strategic advisory insights, to controller expertise and skilled finance and accounting pros who run the day-to-day finance operations and set up technology applications that are relied upon to track what’s going on at the company and help everyone forecast what’s ahead. When properly combined, the levels of finance serve as a full-stack CFO solution that companies in the early stages of growth can build upon, depending on their unique needs.

How to Develop Robust Finance Operations

A mix of recording what has happened and predicting what’s next is part of the day-to-day work in finance, as invoices are sent out, bills paid, transactions recorded and cash flow managed. An accounting manager and accountant can manage the daily accounting needs, and a cost accountant can scrutinize the information that’s gathered. Regulatory compliance requirements and audit prep are addressed as necessary, as are technical accounting issues. Financial planning and analysis assists the needs of the strategically minded members of the team.

With the right processes and systems in place, the company can produce timely, accurate financial information. In turn, management will be able to make informed decisions as they debate whether to expand their hiring efforts, invest in a new product line or go after an acquisition. This includes developing the accounting structure and streamlining the payroll and AP/AR procedures, and improving the close process.

When You Need Startup CFO Insights

Talk of a CFO can seem premature for some companies on the fast yet early growth path, but the expertise of this strategically minded executive role can make all the difference as a company finds its way forward—and it does not have to be at a full-time capacity.

CFO expertise can be relied upon for a variety of matters that will help to push the company toward its goals. On a part-time or fractional basis, a CFO can oversee debt and equity financing, advise on the company’s capital needs, answer the tough questions from the board and investors, and ready the company for any major transactions ahead, such as an IPO or a merger or acquisition.

Startup Controllers Set the Pace

A skilled, strategically minded startup controller fills an essential role as the young company establishes its budgeting and planning processes, creates intelligence spending plans and conquers accurate and timely financial reporting. It’s critical to understand what’s going on at the company in a way that the senior team, the board and any investors can actually understand.

The Tech Stack and Its Essential Layers

Technology provides the underpinnings for every company, and they can realize great value by carefully selecting technologies that work well together. A “tech stack” of integrated applications enables efficiencies across the responsibilities of the finance team, from basic accounting to billing/invoicing and expense reporting to cloud storage and more. Integrations are key, because if these systems are disparate, the workload can be redundant and burdensome, and the information not as smoothly shared and clear as it could be. Think through the various applications you need for your own company’s tech stack.

The Bottom Line: Always Planning for Future Growth

When does a company need a fully formed finance team? It’s a common question, but there’s a different way of looking at this: What matters is whether the company has access to the right capabilities, skillsets, operational expertise and strategic insights for making informed decisions and continuing on their growth path. Companies can scale up from a part-time outsourced team to full-time players over time. It can be gradual, or it can be rapid, depending on the time to scale.

Entrepreneurs can have a team made up of the right people, with the right skillsets, ready for them. When more is needed—setting up the company for a IPO, taking on a revenue recognition quandary—that specialized capability can be brought in as needed. A full stack CFO solution provides exactly what’s needed as the startup moves forward so that expectations are met—and surpassed.

Tracey Hashiguchi heads up RoseRyan’s Emerging Growth Solution area, which focuses on delivering all areas of finance and accounting that VC-funded companies need to go further, faster. This practice area delivers all the finance that growing companies need through its dedicated team of savvy consultants. She develops RoseRyan’s strategy, programs and consulting team for helping startups get to the next level. Before joining RoseRyan, Tracey worked at Deloitte.