How to structure and scale your finance team for success
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When you’re building a business, there are myriad things to consider—from attracting the best talent to differentiating your products or services. One area that warrants special attention is how to structure your finance team.
In the early days of your business, you may not even have a finance department, but as your company grows, it’s important to build out a department with defined finance roles and clear procedures.
“Your finance team may not be customer-facing or generating revenue, but they can enable and amplify the business,” says Alex Song, Head of Finance and Capital Markets at Ramp. “They are not meant to hinder the rest of the company.”
How you structure your finance team can either set your business up for success or failure. Topics covered in this article:
What does a finance team do?
The finance team plays many roles in an organization including:
- Accounting & financial record keeping
- Establishing and managing financial procedures
- Spend management
- Procurement planning
A finance team's tasks will likely vary depending on the size of the company, its growth phase, and goals. In today’s environment, with an increased focus on digital transformation and sustainable profitability, the finance team is becoming even more central to its success.
Here’s a look at some of the important tasks that typically fall under the purview of the finance team:
Executing financial management strategies and budget forecasting requires first accurately tracking current and historical expenses. This is the role of the accounting team. Building and maintaining profit and loss statements and other financial statements can help you understand the true cost of doing business and identify areas of opportunity or improvement, as well as enable business planning and strategy. Plus, having clean and accurate financial statements is typically a prerequisite for potential investors.
“The worst thing an investor can see is messy financials that are inaccurate,” Song says. “That can give a first impression that management are amateurs, and the organization is less than stellar.”
Adopting procedures for financial processes
Strong financial policies provide resilience, risk management, and operational efficiency. Your finance team oversees the creation and adoption of such processes and will be responsible for making changes to such policies as the company evolves over time.
Out-of-control expenses can wreak havoc on a company’s bottom line, so an important function for the finance team is spend management. Using software and automation to customize spend tracking and controls can surface potential problems to address before they become an issue.
One area of spend management where a finance team can make a significant difference to the company’s bottom line is procurement planning. When done well, this function involves not only cost-cutting and helping the procurement team with decision-making, but also looking for ways to better align the company’s finances with its goals and values, eliminating potential contract management or compliance concerns in the future.
Fundraising and investor relations
The importance of fundraising and interacting with investors will depend on the size of your company and its primary sources of capital. For companies seeking funding from outside investors or who are looking to the debt markets for cash, the finance team often owns these relationships.
How are finance teams structured?
Again, the size and composition of the finance team will vary greatly depending on the company and the industry. It will also depend heavily on your company’s growth stage. The finance team at a startup will, by definition, look extremely different than the team at larger organizations or one that’s just completed a round or two of funding.
Startup finance team structure
A true startup with only a handful of employees may not have a finance team at all. At this stage, employees often cover multiple roles, and the founder or CEO may handle financial duties like cash flow management and payroll, outsourcing the rest to third-party accounting firms and financial consultants.
The first in-house financial hire for a startup is typically in the accounting function, someone who can handle bookkeeping and start to implement spend controls. Depending on your needs and your financial situation, that role could be full-time or part-time and either an employee or a contractor.
“Your first finance hire will usually handle accounting, paying the bills, and the cash receipts process,” Rob Stephens, CPA and founder of financial planning company CFO Perspective. “They may do reconciliations to make sure that everything is correct.”
Mid-size finance team structure
As a company grows, its finance team will grow as well. In addition to an accountant, the company may begin bringing on other hires that can take on other financial activities for the company. That might include finance folks who are more forward-looking and strategic and who can help with financial planning and analysis.
“If the founder is planning to scale with help from angel investors or venture capital, they’re going to want to bring in someone that really understands finance sooner rather than later,” Stephens says. “They’re going to want to start preparing the company to be able to answer questions for those investors.”
Enterprise finance team structure
By the time your organization has grown to an enterprise level, you’ll likely have several finance leaders within the department who each have a specialized team reporting to them. Depending on the needs of your business, this may be the time to hire a controller or chief financial officer.
Not sure which executive you need? A CFO typically oversees the finance team, provides financial strategy and guidance, and reports to stakeholders. A controller, on the other hand, typically supervises bookkeeping, looks for ways to make financial reporting more efficient, and focuses on compliance and risk management.
Except at the largest organizations, it may still make sense to outsource tax-related work to a CPA firm, Stephens says.
“Tax is constantly changing,” Stephens says. “Let the CPAs who work day-in-and-day-out in taxes handle that for your enterprise. The CFO just needs to be aware of the larger tax issues that are applicable and know when to call the CPA for more detailed information.”
How to scale a finance team
In general, your earlier finance team hires will be generalists who can do not only the job for which you’ve hired them (such as bookkeeping), but can also pitch in on other finance areas as necessary.
“The first one or two people you hire need to be very well-rounded folks with a high aptitude for doing both tactical and strategic work,” Song says. “Then the next few hires would be specialists, where you isolate for true domain expertise.”
If you’re planning to grow and scale the organization quickly, you may also want your early hires to have experience building and supervising a team. At Ramp, the first hire was the accounting lead.
“She came in with significant experience, but very shortly, her job was also to hire a team around here,” Song says. “With hiring for any position in a growing startup, it’s important to be upfront with respect to what they’ll be doing in the beginning and how that will evolve over time. If that’s completely uncertain, it’s important to be upfront about that as well.”
After the accounting lead, Song hired a head of FP&A to start buttoning up financial statements, creating a strategic budget, updating the operating model, and implementing best practices across the firm around expense and travel policies. After bringing on a handful of generalist team members, the finance team brought on its first true specialist to focus on payroll.
Why the right talent matters for finance teams
A company’s culture will evolve over time, but it’s important to think carefully about how early hires will work with both others in their department as well as others across the company. By positioning itself from the start as a partner to others in the company, the finance team will have an easier time rolling out policies that may require others to change their behavior.
The pandemic and its associated challenges have reinforced the importance of cross-functional collaboration for businesses to stay agile and have the ability to pivot as necessary. As the team expands, it’s important to also emphasize the importance of training all new staffers in financial policies, procedures, and competencies.
“That builds a lot of resiliency and continuity into the process,” Stephens says. “That gives management the confidence that you can survive anything and you’re not going to be stuck if one person leaves. You want to build processes, procedures, documentation, and cross-training into the expansion.”
As the team gets even bigger, the organization should begin thinking about segregating duties, so that team members or departments might own one part of the process, even if they know how to do them all.
“You don’t want one person to do every step of certain processes because that can leave you vulnerable to fraud or mistakes,” Stephens says.
The key to finance team success
In addition to talent, one of the most important factors leading to the success of a finance team, regardless of size, is making sure they have best-in-class finance and accounting software to boost productivity and efficiency. An automated spend analysis, for example, can both surface common issues like duplicate subscriptions and more complex challenges like inefficiencies in the supply chain in real-time.
The more that a team can automate their processes using tools like Ramp, the more they’ll be able to focus on strategic planning of the company’s finances and on empowering employees to make smart financial decisions on the company’s behalf.
Managing accounts receivable and accounts payable is a slice of a finance team‘s duties. Depending on how the team is organized, finance teams also prepare balance sheets and other financial statements.
There is no one-size-fits-all organizational structure for financial teams. It will be highly conditional on your business‘s needs and goals. Finance management (especially for a small business) is a long and sometimes confusing process that will take some level of trial and error.
Depending on the needs of your business, some financial teams compartmentalize duties like purchasing, financial data analysis, budgeting, and accounting.
A finance team manages all aspects of a company's financial health and typically oversees a range of responsibilities, such as accounting, financial audits, bookkeeping, and ensuring optimal cash flow. These teams are made up of finance professionals that play an integral part in business growth by helping make strategic decisions.