How Your Startup Financial Team Changes with Scale

A startup financial team is not going to be the same throughout the life of the company.

As your startup scales, so should your processes. Although, sometimes, we fail to change how things are run, even though the level of business calls for improvements. If sales and the number of clients/users rise, it becomes a priority to onboard new reps, support staff, and dev team members.

But what about your finance team? As revenue grows, so do issues surrounding your company’s financial health. Things like:

• How to best handle taxes
• Big expense decisions (hiring those new staffers, moving to a different location, buying equipment)
• Continuing to scale via garnering investment funds, loans, or marketing/sales campaigns
• Stabilizing the business through sound financial practices and forecasting growth for better decision making

Main point: As your startup grows, so should your accounting procedures and finance team.

But what does that look like, exactly?

Pre-Funding: Setting the Financial Foundation

At this stage, you’ve got a viable idea showing promise. Maybe you’re self-funded and intend to bootstrap. Or, you’ll look to attract a seed round at some point. Either way, this step is the same.

Solid financial health improves the change of long-term success — Startup, established, funding, or no outside funding alike.

The Pre-Funding Finance Team

Since “pre-funding” is a broad term, there are a number of potential solutions. However, it’s a great idea to partner with an accounting solution early on. Doing so allows you to scale up the service as your company grows.

Here are a few scenarios:

• Extremely early: Use an accounting firm for basic bookkeeping, account reconciliation, and to handle your taxes.
• Young and growing: Advance the services to include a quality budget, get monthly cash flow reports, and some payroll assistance (depending on the size of your team).
• Bustling and preparing for seed money: This is where you’ll want to begin forecasting potential growth to show potential investors what you may accomplish with their funds.

Seed Stage: Tracking the Right Metrics

The seed stage is exciting. Your concept is proven and, now it’s about honing in on the product/market fit to scale. Business needs change dramatically at this level. Key performance indicators (KPIs) are now a critical component of performance.

Growth isn’t magic, but many companies don’t track the right metrics to understand their data-driven performance.

The Seed Stage Finance Team

Most of your investment funds go toward hiring staff that sells the product, supporting those who use it, and those who make the product better (e.g., more features/improved functionality) at the seed stage.

Your finance needs are likely (still) best served by a startup-focused accounting partner. That said, the relationship deepens during the seed stage. The services you’re looking at here include:

• Financial analysis: You want an accounting team that understands the software, dashboards, financial, and non-financial metrics specific to startups. Plus, they’ll have experts to analyze and report what they see, empowering you to make better decisions.
• Improved accounting processes: As you become more established, it’s vital to ensure your accounting procedures are sound. An experienced firm will help you develop and implement this system — From accounts receivable to maintaining payroll compliance and everything in between.

Series A: Preparing for Serious Fundraising

If your company proves the concept and begins to show signs of serious potential, often, the only thing missing is the funds to rapidly scale. At this point, many early startups seek “Series A” funding.

Although, getting this level of funding isn’t easy. And once you land venture capital, the company’s financial needs take another huge leap forward.

The Round A Finance Team

Again, there are two levels to the Series A team; pre-funding and post-funding. Pre-funding comes in the form of:

• Creating the projections of potential growth
• Figuring out how much the company needs (usually a few different scenarios/numbers)
• Preparing the post-funding plan/budget for hiring, big purchases, and so on

Then, there’s after funding. Here, the finance team begins to solidify into a team to handle:

• Compliance and tax planning
• Controllership
• Advisory and deep reporting to the executive team

While there is a difference between pre and post-funding, the solution comes down to one thing — Startup CFO services.

In between Seed and Series A is like turning kindling into a fire, so hiring a full-time CFO role isn’t something many startups do. However, there are Virtual CFO services available from many accounting solutions.

Ideally, the accounting firm you choose can walk beside your company from the earliest stages and beyond Series A and eventually help you transition to an entirely “in-house” team after you’re fully funded.

Choose the Best Accounting Partner

By now, you’ve seen the underlying point to work with a trusted, experienced, and startup-focused accounting firm — Like Founder’s CPA.

No matter what stage or level you’re at, we help you start with a solid financial foundation and work with you as you grow to track the right metrics and prepare to find funding. Ready to scale? Schedule a free consultation to speak with one of our experts.