As a business grows, so does the complexity of managing its finances, necessitating a strategic approach to expanding the finance department. While technology can significantly reduce the headcount needed, discerning the appropriate timing and roles for new hires in this function remains a pivotal challenge for many business leaders.

Finance department expansion is best understood as a series of stages, each driven by the evolving needs of the business:

1. Bookkeeping Stage: Initially, many companies operate with just the owner or a founding team member managing the finances. As the business grows, the complexity of financial transactions increases. More employees necessitate intricate payroll processes, more vendors mean a greater volume of invoices and an increasing number of customers leads to higher receivables. At this point, the need for a dedicated bookkeeper becomes apparent. Some smaller businesses might choose to remain at this stage, distributing these tasks among various employees to manage the workload effectively.
2. Accountant/CPA Stage: The need for precise financial reporting and analysis prompts the transition to this stage. The decision to hire an accountant or CPA depends on the specific needs of the business, such as operating across multiple states, which would likely necessitate complex tax planning and preparation.
3. Financial Analyst/Controller Stage: Businesses entering this stage face increasingly complex financial landscapes that require sophisticated approaches to budgeting, forecasting and strategic planning. Hiring a financial analyst or controller becomes crucial as a business grows toward optimizing profitability and mitigating financial risks through detailed financial oversight and proactive management.
4. Chief Financial Officer (CFO) Stage: Most small businesses will never require a CFO. However, scenarios that might require hiring a CFO include the need to raise significant capital, pursuing mergers and acquisitions, or preparing to go public. A CFO can provide the strategic financial leadership necessary to navigate these significant transitions successfully.

Hiring for each stage requires careful consideration to avoid costly mistakes. To ensure a good fit, take time to clearly define the role and create a detailed job description. During the interview process, first assess cultural fit, then verify skill sets. Background checks, credit checks and credential verifications are nonnegotiable, particularly for roles that handle sensitive financial information or have access to company credit cards, bank accounts or checks.

Furthermore, implementing robust financial controls is critical to safeguard your business. Simple measures like setting up bank alerts for large transactions or low balances can help, as can more complex safeguards like two-step approvals for Automated Clearing House (ACH) transactions and positive pay arrangements.

Training your finance team to recognize potential fraud, particularly phishing attacks and suspicious email attachments, is critical, too. The most advanced financial controls can still be circumvented through social engineering, making continuous education and vigilance essential.

By understanding these stages and taking thoughtful steps to build your finance team, you can better manage your business’s growth and mitigate the risks associated with financial management.

At BSCAI’s 2024 Executive Management Conference, Olon Hyde presented a session, “Growing Your Finance Team.” Join us for more BSC education at the Contracting Success 2024 Conference, taking place Nov. 19-21 in Las Vegas.