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How to Build Scalable Financial Operations for Your Startup

Kristina Perunicic

Kristina Perunicic

Freelance Writer at Optimist
Kristina Perunicic is a freelance writer for Optimist. She studied marketing and occasionally consults local startups on their digital marketing strategy. She specializes in writing and editing small business and B2B content. She also loves reading, volunteering and spending time with her family.
Kristina Perunicic

Latest posts by Kristina Perunicic

One of the most important questions faced by startups is “How do I create a scalable financial department?” It’s also one of the most difficult questions to answer because a blanket approach doesn’t exist. Every startup will face its own unique challenges. The added pressure of responding to the COVID-19 pandemic is another major consideration weighing down on startups right now. 

Many have had to make some very decisive yet difficult financial moves in order to stay afloat this year. Some startups are even looking at longer-term implications, such as shifting to a fully remote workforce and scaling back certain aspects of their business as a result.

As part of every startup’s evolution, business owners must understand what is needed within each different stage of growth. Startup leaders also have to understand different financial roles, what they entail and when to fill them.


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Financial operations are already critical to your startup’s success, and the current circumstances have only increased the importance of a strong financial infrastructure:

Crucial functions

No matter how gradually you navigate the process of building scalable financial operations, there are some core functions you won’t be able to ignore. As you scale, responsibility for these functions will shift from various individuals and teams

Some of these functions will end up being automated (which is a good thing). In fact, startups responding to the new realities of coronavirus and its impact on their business have already found ways to streamline vital financial functions and make them easier to manage remotely.

The key is understanding financial operations at the outset so that the early stages of your business can help you grow at the right pace.

For example, nailing some these financial operations basics is key: 

  • Payroll is a function that pays employees and vendors
  • Cash management is a process that handles accounts receivable and accounts payable
  • Credit control ensures that clients pay on time, that debt is avoided and managing issues if they happen
  • Financing is a process of finding funds to keep the business going (and growing)
  • Planning assesses the chances and risks the business encounters

Right now, planning teams in startups are assessing the impact of the pandemic while advising cash management and payroll on short term cash-flow matters. This shows how interconnected and vital various teams are within a startup’s overall financial operation.



How to build a scalable finance team

Many entrepreneurs think they need to have an entire financial team by their side. Not only is this false, but it could also hamper your chances of success. Financial professionals are expensive, and jumping into hiring a whole team when your business is young could mean serious cash flow problems.

Payroll is generally one of the highest costs for businesses, averaging more than $300,000 for 5 employees, according to Embroker. That means entrepreneurs need to think carefully about whether they can afford each new employee they want to add to the team.

DIY

During the earliest stages of your business, you’ll probably have to handle most of the financial functions on your own. As an entrepreneur, you have to wear many different hats. For now, one of those may have to be the financial manager hat. 

As your company grows, delegation becomes critical. Keeping financial operations in-house is one of your options, and whether or not you do that depends on you, your confidence in your skills, and the skills of those working beside you. Dealing with credit control on your own could help you understand the financial rhythm and pain points of your business. 

Ask for help

Naturally, you won’t always know everything, and this is when asking for help is a good idea. To survive the most recent, virus-driven economic downturn, startup leaders are calling in favors to help bolster their financial operations. The first step is to explore your peer network for free or low-cost resources. 

Most startup founders have plenty of well-meaning connections that could talk you through financial processes and answer your questions. Make sure you only turn to trusted connections (or you ask them to sign an NDA). Ensure they understand the early (and risky) stages of scaling a new business. 

Best case scenario: That friend who is a finance whiz and is also familiar with your business model.

Outsource

Lots of startups are seeing their universe of potential talent explode right now. More people than ever are working from home, or hunting for their next gig.

Hiring the wrong person could cost you more than you can handle. This is why a good early-stage option is to outsource financial roles to professional freelancers or firms. Inexpensive accountancy companies can manage your payroll and cash management.  Of course, automation is an option at any stage of your company’s growth, but whether you want to automate financial processes early on depends on the amount of work necessary.

For now, if your current process doesn’t entail too much repetitive work, it’s okay to delay automation. But also remember never to waste a good crisis, as the saying goes. If things are slower as a result of the pandemic, use this opportunity to set up better systems and automate where you can.

In a time of crisis, the trick is to use temporary solutions—ones you can move on from quickly. Your business will grow and you don’t want to get too accustomed to one way of doing things when you may need an entirely different process in three months. Staying flexible is one key to being able to scale quickly as your business grows.

Freelance or part-time help

Another great option for your early-stage business is hiring a freelancer or part-time help. This is a good idea in case you are not sure how to handle financials on your own, and you’d rather not risk it. The good news (for employers) is that the current talent market is flush and you can likely find highly-skilled finance team members easily.

Hiring a freelancer or a part-timer could be cost-effective at the outset since you will only have to pay these workers for the amount of time they spend on your company, not a full salary. Contact freelancers directly, not through an agency. Although it may be easier, you’ll pay an extra fee on top of the hourly rate of the freelancer. 

The best thing about these flexible teams is that they can grow with your company. You can always hire more of them or introduce them as full-time team members when the time is right. This flexibility is especially important at a time of economic and political instability when business leaders need to carefully manage growth and spending.


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Automate

Recent events have shown companies just how productive their workforces can be when they automate key tasks and go fully remote. Automation is an excellent solution for many companies at first, even if they don’t have a lot to automate. This way, a portion of manual, repetitive work is taken off your plate as an entrepreneur, your freelancers or part-timers, or even your accounting agency. 

It lowers costs and boosts morale since your employees don’t have to handle time-consuming administrative work and they can dedicate their time to creative tasks. Automation also makes your transactions quicker and more accurate. 

For example, you could automate your accounts payable and your payroll. Automated elements are incredibly easy to scale and they will grow as your company grows. It also gives you more time to focus on financial planning and other areas that require more creativity. 

Flexible and scalable financial operations are vital

The coronavirus pandemic has underscored the critical need for financial operations to remain adaptable while focused on stability and growth within startups. Whatever stage of your startup’s growth, it’s key to nail down those critical functions that undergird your company’s success while determining the leanest and most effective method to scale your financial operations.

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About Latest Posts Kristina PerunicicFreelance Writer at OptimistKristina Perunicic is a freelance writer for Optimist. She studied marketing…