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What is the role of the finance function at different stages of company growth?

finance function evolution

How does the finance function support a growing business?

Finance functions are crucial to every business – no matter the product, staff or market position, any successful company relies on their finance function to fulfil important tasks, from accurate reporting and rigorous compliance to value-adding analysis and forecasting. But these tasks vary according to the size of this business, and their success is dependent on having the right people in place to perform them properly. This article outlines the work of finance functions at different stages of corporate growth, examines the role of outside investment, the importance of personnel and what a finance function transformation can do for the careers of those involved.

What does the finance function do in different sized businesses?

Finance functions at their most basic level cover bookkeeping, which means simply running company accounts and ensuring compliance with regulation. This role is often filled by a single person or outsourced. For very small companies or those in the earliest stages of growth, the preparation and production of financial results will be the limit of their capacity.

The second stage of evolution for a finance function is the creation of controls and procedures to make the financial reporting process more efficient and the results more reliable. This will often involve bringing in a portfolio Finance Director, whose expertise will be invaluable in developing the finance function to this stage.

Once financial results are produced in an efficient and reliable fashion, they can be analysed to assess performance and present projections to company management, in order to better understand the performance of different products and lines of business, and condition corporate strategy accordingly. To achieve this capacity for analysis and the solid production of financial results that underpins it, an expansion of the finance function is required. This usually entails bringing in a full-time Finance Director to oversee financial strategy, as well as a Financial Controller or Financial Manager to handle the day-to-day of reporting. The latter will often manage a team of junior finance members to fulfil this responsibility, including Financial and/or Management Accountants and Accounts Assistants.

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As the business grows, the finance function should grow with it, as its potential to add value increases. This can be seen across a range of positions, including senior finance professionals such as CFOs and Finance Directors who have previous experience in mergers and acquisitions or overseas expansion, and can therefore provide invaluable expertise to navigate complicated regulatory frameworks and new markets, optimising the chances of success and avoiding potential pitfalls. The benefits of expanding the finance function are also clear at the junior and middle levels, where increasing capacity in financial planning and analysis allows the business to generate more comprehensive understanding and accurate and detailed forecasting, as well as providing business partnering to other divisions to maximise overall business efficiency.

What is the role of venture capital/private equity in upgrading a finance function?

A further important factor in the evolution of a finance function is the role of outside investment. Funding is frequently used to accelerate company growth by expanding the finance function, thereby gaining access to financial analysis to inform corporate strategy. It is common, for example, to see companies utilise the cash injection provided by venture capital in a Series A funding round to drastically upgrade their finance capacity, often going straight from simple bookkeeping to bringing on a CFO to build out a finance function suitable for their ambitious growth plans. Additionally, private equity firms will usually seek a significant upgrade of the finance function when investing in a company, as financial reporting and analysis is a key part of their business method for managing and assessing their investments.

Who is the best person to lead a finance function?

Particularly at a senior management level, the best candidates for finance roles depend on the size of the business. Different skillsets prove most useful at different stages of growth, meaning it is vital to always have the right person in place. The ideal candidate to lead your finance function at SME stage is unlikely to remain the best person for the job once your business has grown to turn over tens or hundreds of millions. The requirements of the role change significantly. Senior finance roles at SMEs are highly hands-on, frequently involving day-to-day oversight of reporting and production of financial planning and analysis. However, the larger the company, the more strategic the leader’s role becomes, and they are unlikely to be as directly involved. Instead, CFOs and FDs of large businesses use their expertise and network to oversee activities such as mergers and acquisitions and fundraising.

What opportunities for my career are there in a finance function upgrade?

The evolution of a finance function can present an excellent opportunity to further your career. This could take the form of a new position which could be a potential promotion, such as moving from Finance Manager to Financial Controller. If you are in mid-level or senior finance, you are likely to have at least some degree of involvement in the process of upgrading the finance function. This is a useful addition to your CV, as it represents a clear-cut example of a value-adding project that has tangibly improved the company. If you are likely to seek positions at fast-growing, ambitious companies in the future, this will provide an advantage to your candidacy.

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The upgrade of a finance function is an exciting prospect for both a company and its employees, that has the potential to add significant value to the business if the right people are in place to make sure that the project is executed properly. As Camino Search's Senior Talent Partner Oliver Dunne says, “Expenditure on the recruitment and salary of the right CFO to lead a finance function’s transformation generally yields a tenfold return”. Camino Partners have an extensive roster of high-calibre senior finance professionals with proven track records of successfully leading the upgrade a finance function. We also have an excellent pool of ambitious junior and mid-level finance professionals for whom a finance function evolution could represent a new, exciting challenge. Finally, we work with many high-growth companies who are continually looking to upgrade their finance function to suit the needs of their dynamic, evolving businesses. So whether you’re seeking to make your mark at your firm by leading a successful finance function transformation, or looking for a new, stimulating challenge that a finance function upgrade represents, don’t hesitate to get in touch with one of our consultants today.

CFO/FD - Molly Hogan

Junior/Mid-level finance - Tom Garratt