The Importance Of Your First Finance Hire
The first financial hire is a major milestone for any startup.
Hiring a finance professional isn’t just a big step towards increased growth for a small business. It’s also a critical piece of recruitment that will have a lasting impact on the future success of the company.
A finance expert will make significant decisions concerning growth strategies, in both the short and long term. They’ll also play a crucial role in managing cash flow and dictating the profitability of the business.
The priorities for the finance function will vary depending on the business, but these individuals will always fill a number of key roles - from cash management, to compliance, to commercial analysis, and more.
A finance hire will also influence several areas of the business over time, including business operations, senior strategic planning and financial reporting.
So why is the finance function so important for startups?
What benefits will these hires bring to a growing business, and what are the risks involved with failing to hire a finance professional?
Let’s run through the key roles and responsibilities of a finance professional in a startup, and outline how these hires can transform the future of a small business.
What impact will the finance function have on a business?
It’s true that every startup is different. Each business will have its own financial requirements and challenges, and so each company may need the finance function to play a slightly different role.
For that reason, a startup can choose a different type of finance hire.
Some businesses may prefer a finance professional that works part-time, while others may need a full-time employee in the office. Some businesses may require a comprehensive range of services, while others may need more specific assistance.
It all depends on the financial situation of the individual startup.
However, one thing is consistent across all businesses, regardless of size.
A finance expert is undoubtedly a necessary hire.
For one thing, a finance expert can quickly increase profitability. Capital investment needs to be managed properly, and a finance hire can conduct a thorough commercial analysis to identify the best uses for cash injections.
A finance professional can also deliver a margin analysis to help businesses understand how to maximise potential profits over time.
Hiring a finance expert can also have an immediate and positive impact on the workplace. A physical (or virtual) presence is handy for employees with financial queries, and can also help with chasing clients or suppliers for payments and invoices.
This is why startups need to hire a finance specialist as early as possible.
Not only can they lay the groundwork for sustainable business expansion, but they can also prevent costly errors from occurring.
The commercial benefits of an experienced finance professional
An experienced finance function can bring a huge number of benefits to a growing business.
One of the biggest benefits is the peace of mind and confidence that a finance professional can help to create. Senior board members and founders can feel reassured that financial operations are under control, which also helps them to allocate time to more pressing tasks.
Plus, non-professionals trying to tackle financial tasks can often overcomplicate things.
Once a finance hire arrives, these regular tasks can be completed more efficiently, which benefits the entire business.
A proficient finance professional can also work closely alongside senior management to steer the business in the right direction. Not only can they help a startup to become more compliant and profitable in the short term, but they can also help to facilitate business expansion by allocating marketing funding and production budgets.
If a company is paying for external accounting services, a full-time finance hire can help to reduce these overtime costs. A finance specialist can also lay the groundwork for an expanding finance team. They can handle more basic, daily tasks initially before progressing onto larger projects once a junior member is hired.
Risk management is also one of the biggest advantages a finance hire can offer.
Managing a startup, particularly during a growth period, can be a difficult task. Turbulent market conditions can cause issues for the business, especially if capital investment isn’t immediately available.
A finance expert can help startups to build solid contingency plans that prepare the business for worst-case scenarios. This can be invaluable if any unexpected obstacles emerge.
The potential risks of failing to hire a finance function
A dedicated finance specialist can clearly offer a huge amount to startups, from daily financial management to long-term business planning.
But what are the risks associated with failing to make a finance hire?
One of the biggest dangers is a lack of time and resources across the business.
Financial tasks (i.e. reporting, invoicing, forecasting) will still need to be tackled in the absence of a finance expert. This means that other employees in the company will need to handle them, which is often unnecessarily complicated and time-consuming.
The more time these employees spend on financial tasks, the less time they spend on their specialist roles and responsibilities. This can have a negative impact on other areas of the business, such as marketing and sales.
A lack of financial expertise can also damage a startup in the long term.
Without business contingency plans or effective investment management, a startup can find itself in serious trouble over time. Although a business may be able to survive in the short term without financial support, in the long run, severe issues are likely to occur.
Hiring an experienced and qualified financial professional should be a priority for all small businesses and entrepreneurs.
Although making the hire can be expensive for a startup (i.e. paying a new salary) the long term benefits massively outweigh these initial costs. A financial specialist immediately enhances the value of the company and serves as the backbone for future growth.
Businesses cannot expand effectively without a watertight financial plan - and businesses that are unable to expand risk being overtaken by the competition. With a skilled financial expert on the team, a startup gives itself the best chance for success.