Whether it’s troubleshooting your printer, crafting job descriptions or just explaining what machine learning is (and why you’re working on it) to your Mum – it’s safe to say that as a founder, you learn lots about your capabilities.
But as your business grows, sooner or later you’ll look to gain specialist support for the critical elements of the business, and there are few areas more significant for long-term growth than finance.
But knowing when to share those bookkeeping duties can be tricky. Here are four moments when tech scale-up leaders should ask themselves “is it time to get help with managing our finances?”
Hurray, I’ve founded a tech business! Can I outsource these pesky spreadsheets?
From day one of the business, tech founders have to control their organisation’s finances. Investors and stakeholders will want to know that the leadership team has a handle on their funds, including where the money is coming from and where it’s going. That means you can’t simply outsource everything early on. And, of course, funds are tight – so it’s often important to keep as much in-house as possible.
However, if you’re part of a leadership team you can work together to find out where your individual skills lie. Time is short, so it’s important to play to your strengths. It might be a laser-sharp understanding of the numbers, or it could be operations, technical development, sales and marketing or overarching strategy. Define your individual roles as co-founders and make sure that the CFO has a head for figures.
Updating the books is taking over…
As your business grows, the administrative elements of bookkeeping can become extremely time-consuming. There’s a balance to be struck between being cost-conscious and ensuring that you have enough time for the planning and strategy that will be critical to your business’ future.
Running the books yourself will likely become untenable as the business grows and you start to look for funding. Networking with investors and investigating research funding can easily become a full-time occupation. If accounting is becoming too much, it’s time to consider outside support; but remember that a good finance partner will do much more than simply taking the spreadsheets off your hands…
We’re thinking about funding, but our finances are in a mess
With the demands of growing a business, it’s not uncommon for scale-ups to let their accounts become a bit of a mess. But while updating spreadsheets might not seem like the most pressing priority, outdated books can become a hindrance further down the line. When you’re looking for funding and trying to demonstrate sound finances to potential investors, you don’t want to be held back by chaotic accounts.
To start fundraising, you need everything well-organised, on a system, well in advance. Investors may ask to see monthly accounts, end of year statements, cash flows and forecasts – and you should be able to provide them in minutes, not days or weeks. It can be hugely valuable to have your finances sorted a year or more in advance of approaching investors, so this is the point to begin working with an outside partner.
We want the best investment for the business, but we’re getting strapped for cash
Planning really is everything when it comes to fundraising. Not all investment is created equal; it’s not just about getting the highest valuation for your business, but the conditions attached to the investment, which might impact future funding or how long founders have to stay in the business.
Sometimes businesses reach the point when they need timely cash and they have to take the offer that’s open to them. However, if you think years – not months – in advance about fundraising and when you’ll need investment, you can work to get multiple offers, to allow you to choose the right investment for you.
Strategic advice on funding sources, the implications of investment and when the right time to apply is can be critical, so working with a finance partner who has a long-term understanding of the business will certainly pay dividends.
Finding the right partner
There’s no way around it: the co-founders of a tech business have to understand its finances. It’s a critical part of the strategy and overall direction of the business. But beyond the early days of a business, it can be impractical for the leadership team to run the books – and it’s critical that you don’t fall behind.
Tech scale-ups should look for a partner for their finances: someone to not simply manage the bookkeeping, but to understand the big picture and provide invaluable strategic advice, whether it’s on cash flow or fundraising. Through a long-term, two-way partnership, you can develop the best processes and timeline for your organisation. The right partner will ensure that your finances enable your business to reach its objectives, whatever they may be.