Finance functions evolve significantly as a business grows, forcing its leader to adapt and ask whether they’re fit for the job.
Pace of growth, industry size and sector, and company culture impact what capabilities are needed, making it difficult to have a universal rule of thumb. However, identifying inflection points in an individual company’s life cycle helps finance professionals prepare for the future.
“The key thing is step back and take some time to think about these requirements,” advises Rick Payne FCA, head of the Finance Direction Programme at the ICAEW. “It’s something that a lot of people want to be able to do, but it’s so easy to get sucked into day-to-day, there are so many operational things you have to do.”
The key issues to examine are: the quality of the KPIs and whether they accurately reflect the cause and effect relationships within the business; the ability of accounting infrastructure to keep up with growing complexity; and if you have the right skill set.
In a smaller businesses the CFO can be a floor-to-ceiling role, which switches between being involved in the detail and developing strategy. As a business grows, you have to get used to building a team, delegating and not knowing everything that's going on.
Metro Bank’s CFO Michael Brierley offers an extreme example. He’s steered the business’ finance function from implementing a payroll system as its first employee to having thousands of staff and a £15bn balance sheet: “When I get my payslip every month it has ‘1’ in the top right-hand corner. There was nothing when I arrived, we were looking at a blank sheet of paper,” he told AccountingWEB.
Brierley’s adamant you can learn on the job. That a single head of finance can be responsible for scaling a business from nothing and building a finance function.
Payne suggests adapting to a growing team is possible too, provided you have the basics of being a problem solver, good communication, are adaptable and have good judgement.
“There's a mindset that's planning, thinking ahead and mapping the strategy, when the reality is that you also have to be adaptable and opportunistic. CFOs grapple with that tension. How much can I plan and how much can I free things up and let things happen?” He says, adding that persevering through the growth journey can be hugely rewarding.
Today, Brierley’s role at Metro Bank includes dealing with the regulator, risk, working with investors and analysts, and managing the bank. He suggests CFOs shouldn’t have any boundaries and should be an important part of managing the whole organisation alongside executive colleagues.
The importance of having a number two in command starts to have grow as you scale too. Having someone you can trust to do the day-to-day and really look after things, so that you can concentrate on the big issues.
While the inflection points in a finance department’s growth vary for different types of business, taking on investment can be a clear catalyst for change.
“One of the big junctures is getting external equity funding,” says ICAEW’s Payne. “That provides a big step-change in what’s expected. You’re meeting internal needs and investors. They will be looking closely at the organization regularly and finance is a key part of the management team.”
Seedrs head of finance Karen Kerrigan, who we interviewed earlier in the month, has been in the role since the company was launched, as well as being in charge of HR and legal. Raising investment was the step change that’s made her and the management team decide the finance role needs to change.
“Having gone through our Series A and raised another £10m this year we're now at the stage where we'll be looking for someone to do this full-time,” says Kerrigan. “I think as a growth business making sure you're gearing your financial metrics in a way that puts you in the best position possible to take advantage of the opportunities that come up is absolutely fundamental. I think I’ve done a pretty okay job until now and I've got a really strong team, but we're coming to that stage.”
Kerrigan’s happy to have someone take on this role. In the end, whether or not a finance leader decides to stay with a company that’s experienced significant growth tends to be a personal choice. It depends on individual wants and whether you revel in the challenge of building something. It is clear, however, that it’s important to take time out of day-to-day operations to ensure the finance strategy has evolved to meet the ever-changing needs of the business.
About Chris Goodfellow
Journalist and editor with eight years' experience covering politics and business. His work has been featured in a range of publications including The Guardian, The Financial Times, The Independent, the BBC and Vice magazine.