Every business has finance operations. Finance operations are the processes, workflows and calendar that people follow for financial planning, purchasing, hiring, compliance and accounting. If your processes are unwritten, unruly, or inconsistent, the lack of process is your process.
You can’t decide not to have finance operations any more than you can decide to not have revenue or costs. But you can easily decide to ignore finance operations as long as possible. Here are some reasons many finance leaders at startups do just that:
- Your CEO. Your CEO is pressuring you to move with speed. You can get organized later.
- Your business partners. They think “slowing down for processes” is corporate evil-talk.
- Your default. You didn’t decide to ignore finance operations. It just sort of happened on the roller coaster from Series A to Series C, a side effect of low bandwidth and higher priorities.
What’s wrong with speed, agility, and prioritizing growth?
The problem is that they are all at risk when you ignore finance operations. When you are growing fast, can you afford to hire too slowly because nobody knew they were missing their hiring plan? Can you move with agility when nobody can get their vendors paid on time? Can you be smart about growth while accidentally underinvesting in marketing?
Take a scenario where you miss your hiring plan for sales capacity. That probably means you’ll miss your top-line targets. You just don't have the capacity to close the number of deals to hit your ARR numbers. You might be spending what you need to spend on marketing to drive the number of leads that you're expecting—but it’s a waste because you don't have the salespeople to work those leads. Not great for growth.
Agility doesn’t just mean moving with speed. It means moving with speed without crashing. That’s what financial operations do for you. People sometimes think that start-ups don’t need processes, because processes are what slow the big companies down. But that’s only if you tried to follow big-company processes. As a finance leader at a start-up, it’s on you to help people manage their budgets, execute their hiring plans, and understand their spending—all in a way that works within the context of a high-growth business.
Symptom: Chaos. Diagnosis: FinanceOps
Not convinced that you should prioritize finance ops? Here’s my short list of signs and symptoms that signal you’ve got a problem that will only get worse the more you ignore it.
- Blushing at the board meeting
You’re in a board meeting. There’s a huge variance to plan. That variance might be because you didn't know about a big purchase or a big renewal, or you had poor visibility into hiring shortfall. While you struggle to explain it, you wish that you had insisted on better communication with your business partners. This sucks. And it is preventable.
- Missing top line targets
People don't typically associate financial operations, purchasing, and hiring with missing top-line targets. But how can they not be connected? Spending and hiring are directly related to achieving growth goals. What’s worse than accidental overspending? Arguably, it could be underspending—or poorly coordinated spending. Going back to the example of marketing and sales. If marketing is chugging along but sales is behind on hiring, it can lead to delays in handling customer demos, unmet leads, or higher than expected discounting.
- Lost sleep
Are you ready for an audit? The next fundraise? A restructure? In all of these situations, you need to know where your contracts are and what you’re spending. You need to be able to drop that information quickly into a data room. Just think how much easier this will be if you’ve made an upfront investment in finance operations. Your future self will thank you.
- Sneaky surprises
Like hidden headcount. You might have a hiring plan and somebody might not have the budget to hire, but then they hire a contractor or hire a professional service firm. They work their way around not getting that headcount.
- Bad reputation
As you grow, you will bring in new executives. Look at your business through their eyes. Do people know where to go for things? Are payments on time? Do division heads understand where they stand on their budget? If not, it’s like you’re the one house on the street with a barking dog and overgrown lawn.
Peel back the layers to these kinds of symptoms, and the diagnosis is poor visibility into financial decisions—in other words, poor financial operations.
A massive balloon payment at the end
Saving financial operations for a later date does not work. Cleaning up the mess gets increasingly expensive with scale. It’s just like technical debt on the product side. You can take shortcuts, but down the road, it becomes a real mess. The cleanup cost is much higher than if you had spent the time and money to get it right at the start. It’s like taking on operational debt with a massive balloon payment at the end.
If you are worried that processes will irritate your business partners today, it only gets worse when you have more stakeholders. It’s easier to implement operational guardrails early on, when there's a lot less people in the room. Bigger organizations are more resistant to change. Shape how you want things to work early on, and you’ll be in a better spot than trying to re-architect company-wide processes over time.