Updated: Nov 16, 2021
Whether you are in a startup or a large corporation, proper financial management is key to the short and long-term success of your organization. Startups looking to grow to the next level must make sure their business, and in particular, the role of the Chief Financial Officer (CFO) is scalable. Not having a clear-defined and scalable financial management and infrastructure will stunt growth and potentially hurt your business.
We believe that there are 3 main elements to consider when preparing to scale your company to the next level: processes, tools, and resources. We recommend the CFO to think about whether most issues and bottlenecks that come up in the business can be traced back to your processes, or to the tools it uses on a regular basis. We believe that successfully scaling up your business depends on these two elements, together with the available resources to make it happen. For instance, you may have well-thought-out, proven business processes to handle a client’s fundraising, but if you do not possess the appropriate (or best, for that matter) tools such as a banking software (e.g. neobank) to prepare financial forecasts or a payroll software to keep track of costs, your performance will not be optimal and you will lose a competitive advantage. Equally important is how much resources you have available to fund and support your operations. Let’s take a deeper look at each of these elements.
You should identify the most impactful processes in terms of volume and replicability and then determine their cost, quality, and time. The rule here is that if an investment towards scaling up can improve any of these aspects, then you should proceed to do it.
Now some of you may have experienced fast growth, rendering the setup of new processes quite complicated; you may have built bad habits, your information may be decentralized more often than it should be, and you wonder when the best time to start is
We believe that it is simpler than one might think: as soon as the lack of processes becomes problematic for anyone in your organization, it is the green light to start investing in the processes. This will evidently vary across business types which directly shapes your financial infrastructure, and more importantly, it will depend on the tools that you would have put in place. As part of the formalization of your processes, we recommend drafting key steps in the processes/tools relationship (e.g. defining the time spent per process, key performance indicators, and management rules). The goal here is to begin structuring your financial management team and the role of your CFO to support growth and scalability.
Tools are first and foremost used to shoulder some of your load and secure your activity. Choosing the right tools should be based on your financial situation (opting for Microsoft Excel instead of an accounting software or an ERP) but also on the needs and wants of your team. Investing in new, high-tech tools could make a difference when recruiting and reducing the turnover rate for young aspiring financial professionals or the future talents in your team. Here are some new technologies pertaining to the role of your CFO :
The cloud infrastructure allowing your team to stock and streamline the sharing of data
Big Data and Business Intelligence, big words that might intimidate some, but are to be seen as exciting new technologies that will improve the generation of relevant, precise information and eventually contribute to better decision-making. Predictive analytics in particular will prove useful to CFOs.
Artificial intelligence, which will identify trends and allow the creation of new predictive models to improve decision-making processes.
When deciding whether to commit to outsourcing, it is wise to first consider your motivations: international growth, financial motivations, industrialization of processes, quality improvement, transfer of repetitive task processes with high volume... and add to that the constraints of outsourcing: the location, the corporate culture, the contractual rigidity and the volume of operations.
It is a common misconception that large service providers and outsourcing companies are better than small ones due to the sheer difference in resources and experience available. We believe this is far from the truth: a smaller, similar size outsourcing service provider is able to provide highly flexible and customizable services without the hassle of administrative processes and planning associated with larger corporations, allowing your company to scale up significantly more easily. Moreover, it is an opportunity for the startup to create an “ecosystem” of partners rather than service providers, who will be able to judge your structure’s potential and accompany you for a fraction of the cost. For instance, at Exoqua, we are all about growing together with our clients and providing them with tailored solutions.
How to organize your scalability:
Begin by building your team and providing them with the right tools and knowledge. This involves acculturation and ideation, two key stages in which you have to listen and involve everyone in your team, to build a real culture around design thinking. This is the time to come together and revise processes and tools with each concerned member of your team.
Then, everyone can express their needs to carry out feasibility studies (it is always beneficial to have a 360° view of all your CFO’s processes to be able to prioritize them. This can cost you some money in the process but will save you a lot on others.
It is important not to deprive yourself in terms of experimentation because it can be excellent negotiating leverage with service providers, the Proof of Concept representing the potential promise of a future contract.
For an implementation within a startup, there is a unique challenge to solve which is that of explaining to every employee that structuring the financial infrastructure is as important as securing funding. The CFO plays a key role in the processes to be put in place, even if the errors can come from another link in the chain. As mentioned earlier, using outsourcing service providers is one option always available to benefit from expert advice and distribute and lighten up the load on some other processes your team may be better at handling.
In conclusion, your CFO often faces complicated situations and rarely has the time to sort out all of its issues instantly. While the rapid growth of your business is a great sign, it does not guarantee nor promote the improvement and adaptation of your processes. To best optimize your scalability, it is important to analyze each error or bottleneck thoroughly and build your processes from it. Only then should you adopt a more comprehensive approach including the tools and resources available.
Lastly, it is a crucial part of your CFO’s role to be proactive. They should not hesitate to make their voice heard by directly communicating with people, whether it is a client, a business partner, or a team member.