Generally, as start-ups grow, they hire outside accounting firms. Often, the accountants handle only the taxes and maybe the payroll. If the company continues to grow, and its financial reporting requirements become more complex, the chief executive might decide to bring on a full-time controller who can take charge of maintaining the business’s general ledger and bank accounts. On the other hand, the decision to bring on a finance chief is often tied to strategic decisions, like performing competitive market analysis, raising capital or securing credit.
THE TIPPING POINT A C.F.O. typically takes responsibility for financial analysis, accounting and budgets, along with overseeing insurance, banking, real estate, health insurance, accounts receivable and legal issues.
No matter how small, any company can benefit from having a finance chief to help organize its finances and track its performance. Typically, however, hiring one does not become essential until companies reach a tipping point — $5 million to $20 million in revenue.
The main reason companies hesitate, of course, is the cost — most finance chiefs are paid six-figure salaries. That expense becomes more palatable when the company has more revenue and the company’s numbers need to be analyzed and communicated.
Companies that do not have the revenue to justify paying someone a six-figure salary may consider hiring someone to play the role part time. Trinity Management partners is a great option for this role, fees are based on the annual revenue of a company.
DEALING WITH INVESTORS For growing companies, a common trigger can be the decision to bring on investment capital. At these companies, the finance chief often becomes the liaison charged with keeping investors updated on how the company is performing.
PREPARING FOR DUE DILIGENCE Finance officers can also bring tremendous value to a company when it is considering making an acquisition or preparing itself to be acquired.
The bottom line is probably this: hire a C.F.O. as soon as you can afford one.