Most startup founders are great at hiring salespeople and engineers. These teams directly impact their early-stage growth, so they’re an easy hiring choice.
However, those same founders often drag their feet when building out their accounting and finance departments because they assume they can always catch up on those later. But unfortunately, they find themselves in a dire situation when they begin growing rapidly without having a back office to support them.
If you’re in this situation, your first instinct is probably to hire an outsourced, third-party accounting firm. While a third party might be able to add some value in setting up your accounting function, they’re not tuned into your business needs. They might be handling your account plus seven others.
Unless an accountant really knows your business, they don’t know the right systems and practices to put in place to help your company grow. You need someone who will do more than run your minimum monthly reports.
Why Growing Startups Need Financial Accountability
As your startup expands, your CEO should have someone in place who can provide in-depth analyses around your finances and new product offerings.
That person should be able to consult on whether it makes financial sense to roll out a new business plan or compile a report for fundraising purposes. They should also ensure that your accounting systems, processes, and internal controls are in place.
That person should also hold everyone in the company to some kind of financial accountability. When a startup is small, the leadership often operates on the basis of trust and lets everyone use their business credit cards at their own discretion. But as the company matures, you need records and standards for what constitutes an allowable expense.
“Unless an accountant really knows your business, they don’t know the right systems and practices to put in place to help your company grow.”
An interim controller can perform all of these functions and help you develop a sound budget for moving forward. Their role is to make recommendations that support the startup’s fiscal health.
Even if they’re there in a consulting capacity rather than full-time, you want to bring in someone who will be in the office every day, connecting with the team and learning about the business.
Hire an Expert to Tell You What Your Back Office Needs
Let’s assume your company recently secured a Series A round of financing. You’ve had an influx of cash and are poised for growth, and now you need a controller to level up your financial processes.
Up until this point, you may have had a third-party company paying your bills off-site. But once you pass the Series A point, you want someone on-site who can evaluate what’s working and what’s not.
In addition to making recommendations on what systems and workflows you should implement, they can also advise you on future hires. Sometimes we’ll place an interim controller with a startup, and that person will realize that the role is essentially a hands-on bill-paying position. Therefore, they’ll recommend that the company hire an accounting manager, and we will help the client fill that full-time role.
At the other end of the spectrum, the interim controller might realize that the company’s needs are more expansive and that the CEO requires someone to help with financial planning, analysis, and financial modeling. Then the interim controller may suggest that they hire a VP of Finance, and we’ll get the company started on that hiring process.
Some clients will ask why they need an interim controller to make those recommendations instead of letting the CEO create positions as needed. But most CEOs don’t have an accounting or finance background, so they don’t know who should be hired next. Instead, you should bring in an expert who will help you figure it out.
A Cautionary Tale About Hiring Finance Roles
When a client comes to us and tells us they want to start a permanent search, we assess whether they’re ready to make that decision. If we see that they may be jumping the gun, we strongly recommend that they hire an interim controller to gather more information.
We did this with a client recently, and it’s worked out very well. They’re getting closer to a permanent search because they now have a better understanding of what they’re looking for.
But here’s what it looks like when companies move too quickly on a permanent hire:
A CEO of a Series B startup needed a right-hand finance person, and in a panic, hired a VP of Finance. The person they brought on had 25 years of experience working with high-growth software companies, so they expected to have senior-level responsibilities.
“Clients often assume that hiring a full-time consultant is too expensive. However, it’s well worth the investment to avoid hiring the wrong permanent person.”
Three months later, the person quit because the position was too junior for them. The CEO assumed they needed a VP of Finance, but they didn’t really understand what that job entailed. They needed a much more junior person and instead wasted time and money bringing in someone the company wasn’t ready for yet.
A consultant can help you figure out exactly who you need to hire, and they can also bring order to chaos. If you’re feeling overwhelmed by your financial demands, they can step in and help you get things under control until you’re ready to start a permanent search.
Interim Controllers Can Help Spur Long-Term Growth
Clients often assume that hiring a full-time consultant is too expensive, even for a short period of time. However, it’s well worth the investment to avoid hiring the wrong permanent person, which will be far more costly in the end.
You also have to consider all of the costs involved in bringing on a full-time staff member. While the consultant may charge a high hourly rate, an employee would require a salary plus benefits and perks. When you’re still in a growth stage and can’t truly afford a full-time hire, bringing in a consultant can be the most financially responsible decision.
We also hear from clients who worry that because the consultant is not a full member of the team, they won’t be as invested in the company’s success. But this is what consultants do. They enjoy diving in and solving problems, so don’t assume they won’t see themselves as members of the team or that they won’t want what’s best for the business.
Hiring an interim controller represents the next phase of your company’s growth. By working with an experienced consultant, you can strategize for how best to build your team and continue the organization’s progress.
BVOH can help you find a great solution to your interim accounting and finance needs. Give us a call and we can talk with you about your options.