Financial Planning & Analysis

Financial Consulting for Start-ups: Secrets of Success

In our work in financial consulting for start-ups, we’ve found financial woes are all too common, even in start-ups that eventually make it big. Most companies are started by innovators, who create, sell and mature their core products well before they build their financial and operational infrastructures – if they even build them at all. From bill pay to payroll to reporting, all manner of critical financial functions will eventually fall apart without a robust infrastructure that can accommodate growth.

Many firms also try to build their financial functions on the cheap – a major mistake for any company that has the potential to grow quickly. They’ll hire low-salaried financial personnel to allocate more funds to their products, but in the end, they just have to pay even more to hire qualified people to dig them out of their holes.

Overall, these problems largely result from the myth that process and speed can’t coexist – but they can. Purchase orders, supplier vetting and other sound financial practices may seem cumbersome during the start-up phase, but implementing them from the get-go actually provides for more efficient, reliable growth. Following are a few of the best practices we’ve observed as financial consultants among successful start-ups.

Building Viable Systems

Every start-up needs a thorough needs analysis to provide for a viable financial infrastructure. Sales and service support are different from manufacturing support, for instance, as are the needs of companies new and old. All too often, however, experienced financial personnel revert back to the familiar systems they’ve used at their previous companies. QuickBooks may work for launching a company, but the vast majority of growing enterprises need more robust, flexible financial systems.

The most important system to get right is the ERP. There’s a great deal of innovation going on with ERPs, yet it’s shocking how antiquated some start-ups’ systems are. In many cases, people aren’t even looking at the well-established on-premise and cloud-based ERPs because they’re not used to them.

Successful start-ups use these technologies to their advantage, and they keep an eye out for upgrades and add-ons. And, while smaller and newer ERPs don’t have everything every company needs, there are plenty of add-on solutions for accounts payable, warehouse management, customer relationship management and myriad other functions. In general, it’s important to keep searching for technologies that prevent people from having to perform repetitive, low-value tasks. You’re never really done building your system, and you’re never done automating.

Just as importantly, these systems should be implemented earlier than later, and resources should be set aside from the get-go. The timeline of an ERP implementation will depend upon the overall timeline of the company, but there is never a “good” time to do it. Put it on your timeline before your revenue or internal development grow too big, and don’t budge from that date. Once it’s in place, your innovators and creators will be able to do their jobs without being bogged down by financial inefficiencies.

Hiring the Right People

Of course, you also need the right personnel to implement those systems. At the top of your list should be a leader – a controller, assistant controller or even a financial consultant – who can build a great team and create a financial roadmap that suits your specific start-up. That employee can then hire people to handle procurement, accounts payable, payroll and other critical functions, while other departments focus fully on acquiring and serving customers.

Most companies take an opposite, bottom-up approach, focusing first on accountants and bookkeepers. Typically, these employees find their abilities quickly surpassed as the company grows. They become overworked, and morale suffers as experts are brought in from outside the company to manage or take over their roles. Ultimately, the upfront costs of starting with higher-ranked, more experienced financial personnel far outweigh the costs of bringing them on later.

Fostering Financial Mindsets

Finally, even the best financial teams can only thrive in companies that value discipline and fiscal responsibility. Far too many start-ups assume their ideal cultures will grow organically – even automatically – but productive cultures require a great deal of work to establish and maintain.

A solid HR team can be a great asset in attracting and hiring people who will fit within such a culture. Start-ups often overlook the need for this type of screening, accepting new hires with stellar skills but unfit personalities. No matter how good a candidate looks on paper, they’ll cause damage if they don’t fit the culture.

Senior management is also indispensable in creating a culture of fiscal responsibility. Everyone takes their cues from the C-suite, and if executives understand the importance of a stable financial infrastructure, so will marketing, production, IT and every other cost center.

Want to learn more tips from our financial consulting for start-ups?

Financial forecasting is an important part of any start-up’s success. To help your company get the most predictive value out of your forecast, it’s important to establish a good financial forecasting process. You can learn about our best practices by clicking on the button below for our free guide.

Get Our Free Financial Forecasting Process Guide

And if you would like to reach us to discuss more, you can also contact us through our financial planning and analysis page to speak to a company representative.

Ken Scarince is a Deloitte CPA with 15 years of experience, specializing in system implementations and the development of financial organizations in the start-up phase. Following his work at Deloitte, Ken held Director and VP positions at Skyway Airlines and Chicago Express Airlines. He later joined a small team to launch Virgin America. As Virgin’s founding Controller, Ken built the finance organization from the ground up, implementing key financial systems, accounting operations and cash flow forecasting processes. Most recently, he served as the Corporate Controller at Virgin Galactic, the world’s first space tourism company. He holds a BS in Finance from Marquette University and an MS in Accountancy from the University of Wisconsin, Milwaukee.

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