Financial Growing Pains: Is your financial team keeping pace with your company?

If your company has experienced significant growth, congratulations! In this economy, you are in the minority. Although it may seem like a miracle (given everything the economy has been through), it’s taken far more than luck to bring your business to where it is today. It’s taken hard work and smart planning to not merely survive, but to thrive.

And because you have thrived, you may be facing a unique set of challenges specific to growth. Challenges that demand you not only work hard, but look hard at your business, ready to make the decisions that will support your continued success and avoid those that will sabotage it.

One of the biggest and most common challenges fast-growth companies face has to do with managing employees. Especially, those employees who have been with you from the start, but have not grown with the company. Interestingly, this happens quite frequently in the areas of accounting and finance.

In fledgling companies, the accounting department is typically run by a bookkeeper or an accountant. This person is usually quite successful in the early stages of the business because they have all the necessary skills to manage the financials of a company that’s just starting out. In fact, they are often so successful that they are promoted to “Controller.”
Then the company begins to grow.

The complexity of the financial employee’s work may not even change, but there’s more of it and it’s coming faster. All of a sudden financials are not being produced on a timely basis, frequent inaccuracies/errors occur, there’s slower follow-up on customer receivables, and lo and behold the unhappy kind of accounting “surprises” begin to get, well, less surprising.

The result? A big, fat cash crunch. Not what you want during a growth spurt, but more common than not because of one factor: The seemingly logical, but (in reality) anti-growth mindset of not investing in what does not directly result in revenue.

Since accounting departments aren’t revenue producers, there is a strong tendency to maintain staffing at a minimum. At least until the pain is too intense to bear. Of course, when you feel that kind of pain, the damage is already done.

What the owner of every growing company needs to recognize is that investing in a strong, experienced Controller at the onset of growth is essential to maintaining that growth – and to avoiding the need to recover after waiting too long to take action.

So, what are the characteristics of a strong Controller? What will you as the business owner notice when you have the right person in place?

First, you’ll feel very comfortable. You’ll have the sense that your “trains are running on time” – your customer receipts and vendor payments will be made on time, your payroll will be accurate, and all financial statements will be timely and correct. Second, if there’s an annual audit or review, you’ll find that very few adjustments need to be made to your company’s records.

Controllers take “command and control” leadership profiles within a company, and their mindset and experience lets you rest easy. But only in regards to certain pieces of your financial picture.

Controller’s tend to be more focused on a company’s immediate issues and may not have the necessary big picture experience to address your key financial strategy questions, such as:

• How should I price a new contract to increase our business significantly? How will I ramp up for expected growth?
• When can I afford to add the positions I need?
• How much cash will I need to grow and where should I get it?
• How do I position my company to bankers and investors when seeking funding?
• How do I develop a multi-year plan or projections for the launch of a new line of business?

Even with the best Controller on board, you cannot afford to forgo strategic financial advice during a time of growth. These questions must be answered and they must be answered by someone who knows.

Enter the difference between a Controller and a CFO. 

A CFO is skilled at answering the financial strategy questions that will help your company navigate both growth and downturns. CFOs are more forward looking than Controllers. A strong CFO will not just have your trains running on time, but will advise you of oncoming unwanted trains so that you can avoid them.

Can your strong Controller become your strong CFO?

Some Controllers have the technical training or “book training” to take on a higher level of financial management, but do not have the actual experience of doing it. In these cases, short-term coaching by an experienced CFO may help your Controller grow into a bigger role.

But first, you must determine whether your Controller actually can grow into the strategic responsibilities of a CFO or if additional expertise needs to be brought into your company.

In making these decisions, you have several options – and acting on any of them is far better than allowing your company to experience the financial growing pains caused by something as simple to fix as employee inexperience. You can:

• Bring on a part-time CFO to assess your Controller’s skills and coach the skill gaps.
• Bring in a part-time CFO to handle what your Controller can’t.
• Replace your Controller with a full-time CFO or a more experienced Controller who will eventually be able to fill the financial strategy role.

It’s important to note that inexperience is not a crime and there is no reason to feel “bad” for asking these questions about your team’s ability. Your company is growing and growth means change.

The real crime is in asking your people to do a job they are not equipped to do without training or choice – and putting a company you’ve poured your sweat into at risk.

The smartest business owners treat their employees as their most valuable asset and understand that sometimes means respecting them enough to honestly assess their performance, provide feedback and training and, in some cases, to allow an employee to find a better fit and, therefore, a less stressful environment.