You've got a great product or service, you've been successfully growing your business and you know that in order to reach your full potential you need to invest in your finance team. It's a great problem to have.
If you start a tech company without technical experience on the founding team, you have a problem! Everyone knows this is a problem and will bring in a fractional CTO or an outsourced agency to handle this from day 1.
The finance function has the same challenges. The problem is that it is only seen as a priority by most once it is too late.
Perhaps this is naivety on a founder’s part, budget restraints, or a lack of options. Hiring a whole finance team in-house early on is not the solution.
Getting this right early on, though, is a key driver in the success of the businesses. Not only is the finance team there to keep the company alive it allows non-finance founders to concentrate on their areas of expertise, driving innovation and business growth.
In a large organisation, the finance team will be broken down into a dozen or more roles, but that’s just not necessary or practical for small businesses. Any business under £10m will need all of the below functions, even if only on a part-time or fractional basis.
Average Salary: £25-28k
Keep track and process all receipts and expenses.
Control and reconcile the Bank.
Manage supplier relationships.
Pay suppliers and staff
Credit Control - collect money in.
The bookkeeper role is the bread and butter of the day-to-day finance function. Most founders recognise this need even if they underappreciate what goes into delivering this role well. Many founders will try to do this themselves for as long as possible and eventually will be the role they look to recruit for first.
Rubbish data at this point screws up the rest of the finance function, so get it right.
Average Salary: £35-50k
The Financial Controller is the glue that holds everything together. They have a strong focus on making sure everything runs as it should, empowering the CFO to concentrate on strategy.
Average Salary: £100-150k+
The CFO role can bring the most value to an ambitious business looking to scale, providing you have a strong backbone in place through the other roles. Despite that, this is a role that most small business founders never get access to, mainly due to the cost.
Despite what accounting software advertisers may have you believe, not a role that non-specialists can perform! There are a lot of complex rules surrounding payroll, and it is costly if you get it wrong! If your company operates monthly payroll, this is likely a few days of work (depending on size and complexity) at the end of each month - making this a role very hard to cover in-house.
Average Salary: N/A
Main Roles: Compliance. Annual Accounts & Tax Returns along with tax planning.
Trying to take care of this role in-house at any stage for a small business makes no sense. This is the traditional role of the “accountant” and the extent of most small founders’ relationship with someone finance trained.
Expect to pay anywhere from £3k to £20kp.a depending on size and complexity.
For everyone else, you will find that you need all of those skills in your team but not full-time.
This is where the outsourced virtual finance function comes into play.
Let’s walk through the four most significant obstacles to hiring in-house:
Most hiring decisions boil down to two questions.
Will they be a good fit? The culture test.
Can they do the job? Technical skills
As a founder, you should be able to answer the first, but how do you answer the second when you don’t even truly understand the job role - it’s tough!
Not to mention the usual challenges that go along with trying to hire any team members.
In line with the challenges of hiring, you have the ongoing performance of the finance team to deal with. What does a good finance function look like, do you know?
It’s hard for a small in-house team to stay updated with all the constant changes to compliance and technology in our game.
As you can see above, building an in-house finance team is costly. On top of the baseline salaries, you have a whole host of other costs, such as:
The list goes on. You get the point. There are a lot of other costs to consider that soon rack up.
As a very rough rule of thumb, a growing business should invest 2-4% of turnover in the finance function as a whole.
One of the biggest issues with an in-house team is the need for more flexibility. It is a major weakness in the business. How do you cover sickness and holidays on a crucial business function when you only have one person capable of the role?
In a rapidly growing business, you need the ability to add resources to the team quickly. A virtual outsourced team is perfect for this.
To discuss your options with one of our team book a discovery call.