Most startups CEOs know that they need to focus on hiring top talent, building an innovative and sticky product, boost sales of that product, and making their customers happy. Many first time CEOs understandably focus intensely on these fundamentals, but often do so at the expense of another critical focus area: ensuring that the startup’s financial operations are built on a smart, well-built infrastructure which will enable rapid growth and scale.
Time and time again, startup execs make the mistake of thinking that they’ve won the game with a strong product-market fit and an innovative sales team. It’s true that both are critical, but as you scale it will not matter how many deals your sales team is closing if your company will struggle to manage your cash, AP and general financial operations at scale. In other words, the only way a startup will ever get away with not building out a smart financial operations infrastructure, is if the startup fails to scale at all. If you want to grow fast, you need to be ready.
Top principles for building a strong financial operations infrastructure:
- Build A Strategic Financial Plan. Any startup which wants to grow needs a thorough strategic plan which can support the growth of the company for at least a couple years.
- Invest in the Internal Resources Needed for Scale. The finance team will only be able to support rapid scale if it has the resources to hire a strong team, implement scalable financial platforms, and acquire the financial tools necessary to support the scale (eg tools for financial planning and analysis, robust international accounting software, AP systems, etc).
- Process, Process, Process. The speed of your financial operations, and the trust of investors and external stakeholders, will depend on you having a well managed machine. Make sure that your finance team has well documented, written internal processes for AP, Cash Management, FX policy, Reconciliation etc. Any large corporate will have strong internal processes for their financial operations, as this improves the productivity of your Finance Team.
- Go Global And Think Globally. Ambitious strategic plans usually involve expansion into new markets. Your finance team needs to be ready to support this type of international scale. That requires partnering with the right strategic financial providers who can guide you through global market regulations and practices.
- Watch Cash Flow like a Hawk. A smart cash flow plan is a key component of any strategic plan, especially for early stage startups which need to be particularly careful about every dollar. Keep Your books organized and reconciled regularly to ensure your company is hitting its financial plan. It’s incredibly important that startup executives are on top of where cash is going every day.
- Build Automation From Day 1. Related to process, make sure that any lean cash management operation is as automated as possible. This will enhance transparency, build better controls and lower the chances of internal fraud. Most startup execs trust one another and can’t imagine this being something they need to worry about… Think again.
- Data Consistency and Transparency. It’s amazing how difficult it can be for startups to get clean financial data. This is not their fault; it’s because many financial vendors do not build platforms and tools which speak to one another. Meaning, unfortunately, if startup execs want clean and accurate financial data, quite a lot of work needs to go into ensuring that all suppliers, clients and financial providers are providing financial data in a format which enables consistent reporting and reconciliation.
A lot of the principles and tips above may seem uninteresting or unimportant to the novice startup executive. This is because you have not yet succeeded in scaling and/or internationalizing your business. If you do see that level of success, you’ll be happy you followed the guidance above, or regret you didn’t.
This Article was written by Ziv Dekel, Founder and CEO at Ziv Dekel – Corporate Treasury Consulting
Contact Him at: ziv@zivdekel.co.il
