Taking your business from a Start-up to a Scale-up is an incredible milestone. As you focus on building your brand and raising capital to grow, it is vital to simultaneously focus on financial reporting. Having a proper financial reporting structure not only demonstrates success, but it also instills investor confidence in the business, and its management.
Start-up vs. Scale-up
A Start-up company is a business in the early stages of operations. At this point, a company has established minimal structure, and likely lacks policies and procedures, since efforts are primarily focused on expansion and growth. On the other hand, a Scale-up company has reached the maturity stage through the implementation of internal protocols and procedures. Consistent sales growth and financial stability enables Scale-ups to hire specialized, experienced personnel to effectively support business expansion.
The Finance Function
Through expansion, businesses often neglect to develop their finance functions. At the Start-up stage, a bookkeeper may be sufficient to manage the company’s financial records, however through growth, a finance team encompassing specialized expertise becomes essential to handle more complex transactions.
As a company progresses toward the Scale-up stage, investors and lenders become key stakeholders and rely on financial statements to understand the company’s overall financial condition. At this point, maintaining accurate and up-to-date financial statements that are readily available becomes key, and in the absence of a robust finance team, this may be challenging.
There are many options available for companies on how to scale-up their accounting function:
- Internal finance function – depending on the stage your company is in, you may consider hiring a chief financial officer (CFO), controller, accountants and financial analysts.
- External finance function – external firms can be engaged to handle the day-to-day accounting functions. This can include basic functions such as invoicing, accounts payables and receivables, payroll and others. These firms also provide CFO and controllership services based on the needs of your company.
- Hybrid function – maintain a core team for essential functions in-house and outsource certain roles such as controllership or CFO.
GG Observations
During the growth phase, avoid losing sight of the financial reporting function. The cost of ignoring your financial reporting could lead to making decisions using incorrect financial information and possibly compliance penalties. It is key to managing the business, while ensuring that regulatory obligations and investor expectations are met. The GG team of professionals can help your company achieve financial success by assisting in handling complex financial matters that may arise as your company progresses toward a Scale-up.
