Monday, 8 June 2015

Hire that finance guy...Now.

It is but natural that any startup or early stage organization wants to conserve cash, minimize spend and tread the path of extreme frugality at least till the time they are bootstrapped.

A typical founder group would, in addition to product development, customer acquisition and service delivery, generally tend to distribute and carry amongst themselves the additional load of operations and finance functions. While the move could be thrifty it may not necessarily be a smart and effective use of the leadership team's even more scarce resource - Time.

More the time that the leadership team spends on managing the so called "non-core" activities, the greater is their distraction from achieving the goals of the organization on committed timelines. Such distractions are not only a thief of time but in a world of extreme competitiveness may impinge the very existence of the organization.

It is always better to leave the work to the experts, however easy it may seem on first glimpse. Would you for a minute, have your CFO do the coding for your new SaaS product? or for that matter have your book keeper oversee your mission critical manufacturing parameters? The same fundamental logic applies for Finance and Operations as well - Leave it to the experts.

Most of the off the shelf accounting software comes with a sales pitch that says that it could be used by dummies. Then it is their sales pitch. Probe them with questions around compliance with Revenue recognition, Accounting Standards, IFRS and other associated finance and accounting promulgations and requirements  and that is when you will realize that you will need more than a dummy to meet these requirements. I am not for a minute stating these cant be learnt but why not focus on your strengths rather than dilute your precious time away from the significant.

Then we also have yet another group of entrepreneurs that have abjectly no or very less superintendence over the financial numbers. This is the other end of the spectrum and is an extremely scary and risky proposition. A panacea to this would be set up a monthly review process of financials and operations and understand the financials, the burn rate and how much is left in the tank. Understandably it will not be a quick process to learn but when guided by a finance professional there is a sense of assurance. Measure- should  always be the mantra.

When the time comes for an external investment arises both these groups are left grappling with either an incorrect set of financials or with no or limited knowledge of what goes on in the financial space. The power to negotiate a better deal with the investor communities is lost as a result of this tardiness.

Oftentimes, I am confronted with the question - When do I hire that rock star CFO? My answer is always simple - Not Now. You will know when. But hire that finance guy...Now

Your finance team just like any other team in the organization grows by need and there will come a time when you would need that rock star CFO to interpret and articulate your thoughts, ideas, developments, aspirations and goals into financial terms and relay the same to the investor community and stakeholders.

Till you attain that stature - That finance guy will keep your financial statements in order, squeeze the maximum out of every dollar, will be on top of all the compliance requirements and ensure that the organization is not subject more financial burdens by way of penalties etc. In summation, there will be someone competent in your team that will watch over your finances while you build that thing that is going to change the world.

(This blog post is authored by Venkatesh Nagarajan, Co-founder at SansPareil -

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