The role of a Financial team in Startup businesses

It’s common for a startup business to make a lot of tradeoffs. For SMB startups especially, this is usually because of limited funding.

Many startup businesses have to do without certain specialized staff, for instance, a financial team. But finance experts are critical to the success of any business, whether small, mid-sized, or large scale.

Why a financial team is crucial to a company’s success

As a company grows, the finance department also evolves, with their roles becoming more defined and significant. However, in the early stages, a finance team aims to make critical financial decisions and optimize business processes to be more cost-effective.

Startup entrepreneurs often shoulder the responsibility of making financial decisions to avoid the cost of employing and maintaining a financial team. But this can be detrimental to the company’s growth, given that the entrepreneur may not be very much skilled in that area.

On the other hand, financial experts can help make decisions that will help the company save money, invest rightly, and get more profitable in the long run. In the end, the cost of hiring one will likely be worth it.

And luckily, you don’t always have to hire an in-house team. As a startup, you may consider outsourcing financial responsibilities to a third-party if hiring permanent staff doesn’t yet appeal to your plan. For example, experts at work remotely and can offer you expert financial and business support services.

So, if you’re considering whether you need a financial team for your startup, here are the critical roles they play in your company’s success.

8 roles of a financial team

1. Strategizing

Financial strategy is one of the foremost responsibilities of a financial team, one that’s crucial to enhancing the company’s overall performance. These strategies sometimes involve making bulk purchases to get better value or cutting expenses. However, financial experts now leverage many sophisticated tools to develop more sophisticated strategies to help a company economically.

For one, every buying decision the team makes will aim to complement a long-term goal while satisfying a short-term one. Decisions not made with the future in mind can severely disrupt a company’s progress. For example, cutting down on research in order to satisfy short-term needs.

2. Budgeting

You don’t just load your kids up in the car without a plan on how much the vacation would cost, do you? It’s the same for an organization. Going somewhere and not knowing what it will cost to reach your destination will be like walking in the dark.

After you determine your company’s short and long-term objectives, your financial team analyzes the monetary aspect of things. These financial plans can include hiring employees, raising capital, optimally managing available resources, and running marketing campaigns.

3. Funding

After determining the financial path to achieving your goals, financial experts can help you determine the best way to fund that trajectory. Would your current equity suffice, or would you need to take loans?

Both options have their upsides and downsides. It’s up to the experts to weigh the benefits and costs to decide what’s best for your company’s needs.

4. Profit planning and cost control

The basis of any business is to generate profit, and it’s up to the finance department to find ways to improve profitability. This often involves developing the profitability of individual products, eliminating poor ones, and using cheaper alternatives for production. Whatever methods they use, financial experts can point out ways to improve productivity in your organization.

Without a doubt, this is something startup SMBs will stand to gain from. SMBs are constantly looking at their budgets and finding those things that are draining funds. This is cost control. If you’re not making enough profit compared to your expenses, your financial team can help review things while focusing on your product or services.

5. Tax and compliance

Small businesses often have to deal with taxes, but if you’re an entrepreneur with little or no knowledge regarding how these things work, you can quickly run into problems. The finance team must ensure the entire organization maintains statutory compliance by submitting all government-required paperwork correctly and on time. Furthermore, a well-versed team can employ a robust maker-checker to ensure the chances of error are minimal.

6. Bookkeeping

Bookkeeping is a fundamental aspect of any business, one best left to finance-savvy personnel.

Bookkeeping is the process of maintaining accurate records of every transaction, regardless of the size. Such transactions include invoices, purchases, sales, vendor settlements, etc.

Even though it’s a dollar, as long as it’s part of your business operations, you must note it down to have insight into your expenses and profit.

Startup entrepreneurs may want to handle bookkeeping to avoid being played by an employee. However, this can detract greatly from the entrepreneur’s time – a time better spent on managing other business operations.

Typically, the finance department will be responsible for making payments to vendors, writing checks and receipts, managing cash, and disbursing salary. Although such activities may be distributed among more specialized teams in larger corporations, the finance team tends to handle it all in most startups.

7. Fundraising

The finance team is also usually responsible for fundraising, especially for SMBs. Typically, startups looking to raise money for future projects must keep accurate records through bookkeeping. Investors you may approach will want to see how you’ve been running your business financially to determine if it is a viable investment for them.

8. Managing cash flow

The finance team keeps up with cash in your establishment. As a startup business owner, you ideally want to know how much you have in your bank account at each point. You ask the team, and they tell you. But that’s not all.

One of the finance team’s roles is to determine if there’s enough liquidity to pay your vendors and staff on time. If resources get low, the team may look towards utilizing your line of credit.

On the other hand, excess cash lying dormant in the bank isn’t always best for you. The financial experts will look for viable investments to pull your cash into that will ultimately benefit your organization.

Final words

While these things may seem basic and easy for just anyone, money matters often get complicated. Startups face financial challenges, and if the right decisions are not made on time, the company may get hit significantly.

Having a team focused on money matters and strategies is a huge advantage to your business.

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