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From DIY Books to Outsourced CFO - Where do you start?

When it comes to a Company's accounting needs, there is sometimes a lot of internal confusion. Should we start with a DIY-Software type thing or go ahead and directly outsource it? We collated these ideas to throw light on how each of the accounting roles differ.

A Software – The Gate Keeper

Before you employ your first accounting professional, be ready to invest in a quality software that captures your numbers. By quality we mean the software should be easy to setup and use, accessible, be safe and have the ability to produce basic financial records. In a world full of choices, some cloud providers lead the pack – understandably so, since they provide incredible value for money for the functions they cater to.

For many people the software is either recommended by accountants or other entrepreneurs they have met. So, the implementation of the software is often parallel to having a numbers person handy.

From my experience, a software is most useful because it does not allow transactions to be lost in transit. Rely on a bunch of receipts and in a matter of time, most people struggle to find them. Rely on your memory and you're sure to have some misses. Remember that as a founder/CEO this is not your primary function.

The bookkeeper – Keeper of Transactions

A good bookkeeper is always an asset. A majority of start-up founders I have met over my career are not the best in terms of keeping their papers organised. In a virtual finance department, the process is guided by less or no paper.

So, the rhetoric that I will go back and find the document when I need it won’t always work. In a world of integrated automation, what value can a bookkeeper bring?

As much as we love to think of a paperless and completely automated finance function, it’s never that easy or perfect. There would always be missing documents, unchecked balances or statements that do not tally. Or simply business owners who do not have the time or experience to handle the role.

Transactional accounting, is all about the fundamental “debits and credits”. Without this function being robust, you can only “estimate” what are the business numbers. There is no tangible way to know whether the numbers in your head can actually match the reality of money in the bank.

The Controller – the creator of partnerships

A Financial Controller in a start-up or an SME world is often compared to a glorified bookkeeper - someone who keeps and is responsible for transactions. While there is some truth in this, it might be worthwhile remembering that the control function is responsible for delivery of a robust finance department – be in virtual or in-house.

For an SME, often the controller doubles up as the CFO / Finance Director. The controller is not just responsible for recording the transactions, he is also ultimately responsible for ensuring that the numbers do in fact make sense from the business owners angle.

Does it create a true and fair view of the business financially? She is expected to have an overall view of the numbers and be aware of any obligations, liabilities and changes to legislation – such as the Making Tax Digital initiative. When an SME starts having sophisticated requirements such as specific monthly reporting, a robust debtor and creditor function or a need for consolidation due to expansions, it is a cue to bring on a senior level finance professional.

The controller not only should take over the brunt of managing the numbers, but also be available as a bridge between the management, stakeholders and the administrative team.

The CFO – the Grand Poobah

Grand Poobah

It’s quite rare that an SME wouldn’t know when they need the ultimate numbers person. If you have an exit, an IPO or a major business growth event on the horizon, bring on the big guy, the CFO. You will need her, when your meetings need the broader numbers view of the business to make informed decisions – situations where you can no longer escape with “Let me get back to you with the numbers”. A seat at the table that is missed during strategic level get-togethers.

In this article from Mckinsey, an explanation that – “The selection of a CFO cannot be made in isolation; companies must consider the strengths of the rest of the top team, paying specific attention to its blind spots and missing capabilities” is an important consideration.

The CFO would be needed to create and keep to a financial strategy that builds into the overall organisational strategy. This is different from forecasting and budgeting. It's been able to envision the big picture in relation to the organisational changes that are expected. Every organisation would be impacted by regulatory and economic changes, relative to its size, the CFO can fashion the changes required ahead of them.

Risk mitigation - putting systems in place to lessen the impact/avoid risks relative to the organisation in upcoming time period; is fundamental to the CFO's role. Apart from them the CFO builds a finance team and manages stakeholder communication from the get-go.

So who do you need....

Deciding which role does your company need to fulfill desired objectives can be tricky. It's necessary to take stock of what is internally available vs what skills would most benefit the team. You can choose to keep one or more of the roles outsourced as this allows to free up resources internally. Ultimately, it would only benefit if the roles can feed into a greater and more robust finance function.

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