I have had a lot of conversations recently about staffing the accounting and finance function in the company. As companies grow and shrink, their needs in this area change. We certainly do not want to be over-staffed, and we also want the most cost-effective staff doing as much of the work as possible. For example, we typically do not want our Controller or CFO entering payables – this task can easily be delegated to a much lower cost employee.
In a a simplified organization chart of the different accounting and finance functions, a CFO would be at the top of the chart with a Controller reporting to her. The Controller would have staff in AR, AP, and Payroll along with one or more accounting managers over one or more of those functions. The reality is that most start-up and emerging companies cannot afford all of these positions. My purpose in this post is to explain how to fulfill all of these necessary functions throughout the life-cycle of a start-up company. I am making the assumption that we all understand the purpose of the accounting/finance function as well as the assumption that the company has or will hire the appropriate outside professional(s), like a tax CPA, to help the company remain compliant.
Even at the earliest stages of a start-up, it is usually best to hire a part-time bookkeeper to fulfill all of the roles listed above. They usually do not have the expertise of a high-level controller of CFO, and they will be slightly over-paid for doing some of the more clerical tasks. But the bookkeeper gives an affordable and flexible option to start-ups.
As the company grows and has revenue, the company should begin to look to hire full-time clerical staff to handle most of the AR, AP, and payroll tasks while the bookkeeper remains part-time and delegates everything they possibly can to the in-house staff. One of the major challenges that usually emerges during this process is that the part-time bookkeeper will begin to struggle to keep up, especially with the monthly financial statement preparation and analysis as well as other management reports on how the business is doing and what improvements should be made to maximize cash flow.
Often the next best step is for the company to consider engaging the services of a part-time CFO. This individual will be a strategic direction to this department and may only be needed about a half-of-a-day per month. As the company continues to grow, the part-time bookkeeper will need to be replaced by a full-time Controller or Accounting Manager. All of the full-time accounting staff will report to this person. In addition, this position will take direction from the CFO.
The last full-time hire should be to fill the position of CFO. Often companies can do very well leaning on the part-time CFO services to exceed $50 or even $75 million in annual sales.