As an entrepreneur, you have a vision for the future – and a dream to make it reality.
That journey starts with building your organisation from the ground up, with your finance function growing alongside it. To achieve sustainable growth, the financial organisation typically moves through four distinct phases. In this article, we explore each one.
Phase 1: From Shoebox to Bookkeeper
In the first phase, you incorporate a private limited company to ring-fence your business risks from your personal situation. This brings with it the obligation to maintain proper financial records. Initially, you may outsource this to an accounting firm – but as the business grows, you quickly move to hiring a part-time or even full-time bookkeeper. Often supported by an external accountant, they ensure all statutory obligations are met. They also produce periodic reports: monthly profit and loss, and an annual balance sheet and cash flow statement. Each week you review all proposed payments together, and to keep a finger on the pulse, you check your liquidity position daily.
Phase 2: From Bookkeeper to Financial Expert
Business is going well and the organisation is growing. But the administrative workload threatens to grow disproportionately to handle the volume of transactions – and the complexity of the bookkeeping increases as the need for management information rises. This is the moment to bring in a financial manager, tasked with introducing efficiency into the administrative process: automating invoice processing and payments, and implementing reporting software to meet the growing demand for insight. The financial manager also introduces control mechanisms to manage the ever-increasing flow of transactions. You review the weekly payment run together, and receive a liquidity report with a thirteen-week rolling forecast. Each year, the financial manager prepares an annual budget, and every month you go through the numbers – analysed against that budget. At this stage, you also commission an annual external audit.
Phase 3: From Financial Expert to Business Adviser
By now the organisation has multiple locations and a significantly expanded service offering. Alongside order-based deliveries, you are carrying out client projects and entering into maintenance contracts. As the financial manager faces a growing volume of questions from across the business, you decide to bring in a business adviser – or business controller. This person joins the management team, which includes representatives from all locations. The business controller develops a new budget, broken down by department and location. This is discussed in the management team and, once approved, MT members become budget holders – accountable to the team each month for their numbers. You also review invoice backlogs and outstanding debtor positions with all budget holders on a weekly basis, and quarterly you work together to produce a revised full-year forecast. As the business continues to grow, the accounting package can no longer keep pace, creating a risk of inefficiency. The business controller and financial manager therefore present a proposal to the MT for a new back-office system. This integrated platform covers all business processes and, as a web application, ensures future-proof maintenance. The external auditor is supportive: the new system gives a reliable basis for the audit, saving considerable time and cost. Gradually, a sense emerges that the organisation’s finances are genuinely under control – particularly once a Business Intelligence solution is in place. The BI tool gives the entire leadership team real-time visibility into performance at any moment of the day.
Phase 4: From Business Adviser to Financial Leader
Significant revenue growth is of course more than welcome – but a concern is that margins and cash flow have increasingly come under pressure. As the strain on the organisation grows, you seek outside advice, all the more so because you see real growth opportunities in the market. The recommendation: appoint a CFO and an HR Director to form a three-person board of directors. The CFO should bring experience in the sector, business financing, M&A, business integration and IT. The HR Director should bring expertise in harmonising employment conditions, works council relations and management development. Following a strategic offsite, the new leadership team concludes that the growth potential is enormous – but that the business strategy needs to be sharpened to reverse the margin pressure. The market is moving towards multidisciplinary service delivery, and many smaller competitors cannot keep up. Under the leadership of the CFO, a business plan is developed for the years ahead: focused on increasing added value through multidisciplinary services, an acquisition strategy targeting smaller competitors, and a strengthening of the company culture through a management development programme. Management reporting is expanded to include KPIs for margins, customer satisfaction and employee satisfaction. The CFO arranges financing with the house bank on attractive terms, given the strong track record and the solid business plan. The decision is made to initiate the acquisition strategy once the financing is in place and the KPIs have reached a healthy level.
Collaboration Across Disciplines
From a CFO or financial leader, you should expect not only alignment with the current phase of the financial organisation, but also the strategic insight to help navigate the next phase of growth for the business as a whole. They are an experienced leader who, together with their fellow board members, actively pursues a strong organisational culture – one oriented towards realising your vision. As a CFO, I have extensive experience with businesses in dynamic sectors such as construction and industry, where organisations must breathe with the economic cycle and adapt to technological developments. In recent years I have been involved in buy-and-build strategies for private equity firms, where acquired businesses need to be integrated effectively. Strategic and organisational challenges require a CFO to work in close collaboration with other disciplines. CFO Netwerk therefore maintains networks across finance, people and organisation, commercial and digital domains – to support clients across the board.
Get in Touch with CFO Netwerk An experienced CFO can support you through every growth phase of your business. CFO Netwerk offers a part-time solution that is a natural fit with the phase your organisation is in – a solid foundation for sustainable growth, and for realising your entrepreneurial ambitions.
Interested? Get in touch: in**@********rk.nl
