How Do You Know When It's Time to Build a Finance Team? Copy

Having spent a good part of my career working in finance, both within businesses and now running CASS, one thing I've learnt is that businesses don't always recognise when they've outgrown the financial support they have in place.

It's rarely something that happens overnight. In fact, quite often, everything appears to be running perfectly well.

The bookkeeping is getting done, the wages are being paid, VAT returns are submitted and the accountant produces the year-end accounts.

But as the business grows, the demands on its finances change. And what worked when turnover was £250,000 might not be suitable when that same business is turning over £1 million or more.

The question is, how do you recognise when it's time to do something about it?

The signs your business needs more financial support

One of the first things I'd look at is how much time the business owner is spending dealing with financial matters.

If you're regularly chasing invoices, checking payments, trying to work out what you can afford or pulling together figures for your accountant, there's a good chance you're spending time on things someone else could be doing.

And that's time you could be spending running and developing your business.

Another sign is when you're making decisions without having the information you really need.

You might be considering employing another member of staff, investing in equipment or expanding into new markets. But can you confidently say what those decisions will mean for your cashflow and profitability over the coming months?

If you're relying on your bank balance to tell you how well the business is doing, I'd suggest there's probably room for improvement.

Then there's the financial reporting.

Having accurate bookkeeping is important, but it's only part of the picture. You should be able to understand which parts of your business are making money, where costs are increasing and whether you're actually achieving the margins you expected.

If the first time you properly review your financial performance is when your accountant prepares the year-end accounts, you're looking backwards at information that could be more than a year old.

I've also seen businesses where the person responsible for the finances has been there since the early days. They're loyal, hardworking and know the business inside out.

But as the business grows, the expectations placed on that person grow too. What started as bookkeeping and paying suppliers becomes payroll, credit control, reporting, cashflow management and eventually financial planning.

It's not necessarily that they're doing anything wrong. They're simply being asked to do a job that's become bigger than one person, or requires skills they were never employed to provide.

And there's another issue that often gets overlooked. What happens when that person goes on holiday, falls ill or decides to leave?

If your entire finance function depends on one individual, that should probably be a concern.

None of these things necessarily means your business is struggling. In many cases, they're signs of a successful business that's grown faster than the support around it.

So, do you employ someone or outsource?

This is where I think business owners need to consider what they actually require.

Do you need someone processing transactions every day? Do you need better financial reports? Perhaps you need help managing cashflow, or someone experienced enough to challenge your plans and help you make decisions.

You might need all of those things, but that doesn't necessarily mean you need to employ four or five different people.

Building an internal finance team can work extremely well, particularly for larger businesses where there's enough work to justify dedicated roles.

But recruitment brings its own challenges. Salaries, employers' National Insurance, pensions, training, holidays and the ongoing responsibility of managing the team all need to be considered.

There's also the question of experience. A good bookkeeper isn't automatically a finance manager, just as a good finance manager isn't necessarily a Finance Director.

Outsourcing gives businesses another option.

Rather than recruiting individuals, you can access a team with different skills and levels of experience, using the support you need as your business develops.

That might start with bookkeeping and payroll, before moving into regular financial reporting, cashflow forecasting and more strategic support.

Of course, outsourcing isn't right for every business. Some will benefit from having someone physically present every day, while others might find that a combination of an internal employee and external support works best.

The important thing is choosing an arrangement that fits the business, rather than simply doing what you've always done.

If you outsource, does it matter where the team is based?

This is something I've been thinking about quite a bit recently.

Technology has made it easier than ever to outsource financial work overseas, and I can understand why businesses consider it.

Costs are often lower, there's access to a much wider pool of people and there are some excellent finance professionals working around the world.

But I do wonder whether we sometimes place too much emphasis on the cost of delivering a service rather than the value it brings.

At CASS, we've made a conscious decision to build our team here in the UK.

It's not the cheapest way to operate, but it's a decision I'm comfortable with.

For us, there's value in working within the same business environment as our clients, understanding the challenges they're facing and being available when they need us.

There's also something to be said for being able to sit down together, have a coffee and talk properly about what's happening in the business.

Now, I'm not suggesting that you can't build excellent relationships with overseas teams. You absolutely can, and location alone doesn't determine someone's ability or the quality of their work.

But I do think it's something business owners should consider when weighing up their options.

There's also a wider economic argument.

We're regularly encouraged to support British businesses, create employment opportunities and invest in our local communities.

Surely where we choose to spend our own business's money should be part of that conversation too?

That doesn't mean every service has to be purchased in the UK, but I think it's a consideration worth making rather than simply comparing prices.

What should you actually expect from your finance team?

Whether you employ people directly, outsource to a UK firm or work with a team overseas, I'd encourage you to think about what you're expecting them to deliver.

If all you want is accurate bookkeeping, payroll and compliance, there are plenty of providers capable of doing that.

But if your business is growing, I'd suggest you should be expecting more.

You should have financial information that's accurate, up to date and presented in a way you can actually understand.

You should know what your cashflow is likely to look like, whether your margins are improving and how your business is performing against its plans.

And perhaps most importantly, you should have people around you who aren't afraid to ask questions.

Why have your costs increased? Why is one part of the business performing better than another? Can you really afford that next recruitment decision? What happens if sales fall by 15%?

Those are the conversations that can make a difference.

I've always believed that a good finance team should help you run a better business, rather than simply tell you what happened in it.

It's about finding the right support at the right time

One of the mistakes I think business owners can make is waiting too long before reviewing their financial support.

They recognise they need help, but assume they can't justify employing a finance manager or building an entire department.

The reality is that they might not need to.

Equally, outsourcing isn't automatically the answer. Sometimes employing the right person internally is exactly what the business needs.

What matters is recognising when your existing arrangements are no longer giving you the information, support or confidence you need.

And when you reach that point, looking beyond the cost and considering the value of the different options available.

Because the real question isn't necessarily whether you can afford a finance team.

It's whether your business has reached the point where you can no longer afford to operate without the right financial support.

I'd be interested to hear from other business owners.

Have you reached the point where you've needed to strengthen your finance function? Did you recruit internally, outsource or use a combination of both?

And if you outsourced, did where the team was based influence your decision?