As a CFO at a scaling business, you have to keep a lot of plates spinning.
It’s a tough job, with a broad remit and a lot of responsibilities. That’s especially true in the early days of the business. Usually hired when scale starts to happen CFOs have a hand in virtually every core business function, from compliance to fundraising, to payroll and benefits, to tax, accounts payable and receivable and beyond. Startups don’t become scaleups without them.
Thankfully, there’s a large (and growing) market of finance applications that can help ease some of the burden. Even better, a lot of them are tailor-made for startup teams and small businesses. But what happens once the business starts to scale?
With growth comes complexity, and with it new challenges to consider. One’s headcount growth. That adds volume to payroll processes, and tax and regulatory considerations if new offices are opened overseas. Perhaps there are new People and Operational teams, who also need to use the software that previously sat under Finance. They’ll require different features and functionality from it, and you’ll need better controls to ensure you retain access and oversight. Growth in the customer base can cause friction, too, adding to transaction volumes and requiring more sophisticated payment and accounting capabilities.
It’s no wonder that investing in finance technology is a priority for the majority of startup CFOs: 54% were ready to increase their department spend in 2021. But about two thirds say they lack the knowledge to optimize it, and feel conflicted about their ability to manage new software.
Having a solid plan for not just what you buy, but also when and how can help ease the transition. So how can you identify when it’s the right moment to upgrade? Here are 5 trigger points startup CFOs should look out for – and how to ensure you have the most appropriate tech for your growth stage in place at each.
1. Your team continues to grow
Fortunately, finance teams don’t tend to see a significant amount of churn. Instead, people usually stay on and develop or specialize in-role. As that happens, you might need to rethink your software to ensure it works not just for you individually, but also for the rest of your team and for you in your role as a manager.
The information you handle is sensitive, and processes highly regulated – so it won’t be appropriate for every team-member to have access to everything. You need tech that enables you to restrict access where appropriate, and retain oversight and control over each function.
As your team’s work grows in volume and complexity, it’s also worth looking for solutions that can automate manual processes and free up their time for more valuable work.
2. You’ve entered new markets
Whether you’ve opened an international office, or started servicing customers in new growth markets, geographical expansion puts additional demands on the software you use.
Some tools simply aren’t used widely across certain markets – those that are prominent in the US might have less traction in Europe, for instance. While that isn’t necessarily a problem, integrating competing systems is difficult and risks inconsistency, making later consolidation across markets more difficult than it needs to be.
Tax, regulatory and operational requirements also vary across geographies, and you need to be sure your existing tools are compliant in each. Not all tools will be. As you expand, you may consider industry-specific applications which have bespoke risk and compliance features built in, as well as the ability to handle multi-currency transactions.
3. You’ve delegated work to other teams
One of the upsides to growth is that while the work of the Finance team becomes more complex, it also becomes more focused. As your business evolves and new People and Operations teams are built, you can pass on some responsibility to them.
As that happens, it’s worth reassessing your SaaS stack. What you needed from an HR solution, for example, is probably quite different from what a People team will need from it – like the ability to run surveys, and ways to engage employees rather than just pay them.
Although search for new tools should sit with those teams, you should still ensure you’re involved in the process. An HR solution needs to integrate with your accounting and payroll systems, and provide a good flow through from People processes to the actual payment of rewards and benefits.
4. Your transaction volume has grown
As your client base grows, the value and volume of transactions (both payable and receivable) grows, too. Eventually, that will exceed the capability of smaller startup tools.
SaaS that can help you realize revenue for enterprise work and handle larger contracts is critical to sustain and support your growth. But you shouldn’t jump straight to Enterprise software, which might be more cumbersome, expensive and resource-intensive to implement and manage than you’re ready for. Instead, there are stopgap solutions you can implement to help smooth out the transition – we’ll cover those more in our next blog.
Whatever route you take, you should ensure your new solution is ready to scale with you. It should integrate easily with the tech used across the rest of the business, and automate core processes, like the generation of custom reports.
5. You’ve received new funding
When there is an influx of new investment, it can be tempting to spend it on more software. But funding in of itself isn’t a good reason to upgrade your software stack. Software bought for the sake of it, without proper consideration and before you really need it wastes money. In fact, the more applications you have across the business, the more inefficiencies can arise, hindering growth.
Having said that, with new funding comes growth, and that can introduce some of the pain points above. So even if it’s not the right time to buy, it’s still wise to see fundraising as a sign you should start planning for your future software needs.
A lot changes as businesses scale, and a one-size-fits-all startup software stack will start to struggle before long. But buying the wrong software at the wrong time can do more harm than good, adding expense and causing tension between teams. Developing good hygiene around not just what software you buy, but also how and when, will help avoid those issues and stand your business in good stead to scale.
To find out more about what to watch out for, and how to ensure the software you buy helps you scale, download our free eBook:
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