Bingo! You have hired your first staff in the finance team. What does ‘hitting the ground running’ mean in this role and how do you help them succeed? Also, we will assess why the finance team should request resources ahead of time, what the impact is, if these requests are not considered, and the outputs you should expect as founder(s).
Hitting the ground running
There are specific tasks they can get on with asap. Those tasks include improving your cash collection ratio (assuming you are generating revenue), cash is king, getting hold of your operating expenses analysis for variances, and restructuring your income statement for a true reflection of your business model and the growth stage. The person in question should be able to assess which areas can be automated and beef up the company’s internal controls, without a doubt.
They should be able to manage payroll and assess the financial systems across entities, create a decent cashflow forecast for the next 18 months (which is a long time for a start-up), expense management systems installation, and manage the treasury. Some companies create a 5 yr cash flow forecast and yearly budgets. While that is a good setup for some entities, it’s not a one-size-fits-all. Part of the treasury function is understanding your burn rate (i.e the difference between your monthly inflow and outflow). It is part of their role to set up accounting systems or enterprise resource planning (ERP) for the entities, bring the month-end in-house, handle regulatory requirements, set up the tax strategy and draft a list of immediate priorities with the CEO/Founder inputs.
The finance team must be able to provide reliable financial data that aids strategic decisions. Every financial transaction is recorded in your book of accounts (see the first post). Those transactions are the bedrock of your unit economics. They will do wonders for your strategic decisions and implementation if correctly structured. These tasks are huge, but with the support of your outsourcing partners, it is possible.
Outputs
You cannot move on to the financial strategies until your basics are in place. It is a bit like building a house, but you start with windows and roofs before the structural foundation. It is impossible, is it not? You could get away with getting a Finance Director (FD) or a Finance Controller (FC) to complete the tactical and strategic tasks short term. However, it is not efficient long term. Having them in-house and giving them the resources means you are in control of generating the data, KPIs, and metrics necessary for your medium- and long-term strategies. In addition, they should be able to provide the right system or infrastructure to help build a world-class, business-value-adding finance team.
Since your FD or FC is a lone wolf, his or her influence can only go so far. At some point, the wheels will start falling off. It is imperative to be proactive and ask for extra hands at least six months before the need arises. As for CEOs and founders, ask your finance first hire for data to back up their requests. Most of your decisions should be based on data (when available). You cannot argue with data. However, that will not make the decision; you will.
Why should you ask for help early?
One-(wo)man finance team is a short-term fix, and will require help to build a world-class team. The time taken to hire the right candidate(s) is over three months, at least. The business as usual (BAUs) still need to be completed in the meantime, so start the process earlier. It does not matter if you use internal talent acquisition or an external recruiter.
The new hire will also need time to settle in and get to know your finance operations before they start to add value. Some people settle in earlier than others, but you cannot underestimate how unique and dynamic finance functions within start-ups are. At the stage when the new hire joins, your processes and tools would still need much work, if you have any.
Summary
To summarise, take the finance team's requests very seriously, even at the early stage. Naturally, as finance professionals, some of us believe we should have the answers and have all tasks covered. So, we tend not to ask for help until things start falling apart. Just as you would collaborate with the sales, marketing, or development team on their needs, do the same with your finance team. It will pay dividends short, medium, and long term. Whatever decision is being made should be based on data, not anecdotes.
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