January 2, 2020
Optimizing Your Middle-Market Company’s Finance Function
Posted by Jenn McCabe
As a startup graduates to the middle market, its finance function needs to become more complex, and its finance team has to provide management and investors with more detailed information about the company’s performance, growth opportunities and challenges.
For a mid-market company to thrive, you have to go beyond the “are we making money, and how much” questions that basic bookkeeping and accounting answer. You need to monitor the company’s budget and spending to ensure your operations can continue, and you have to develop forecasting capabilities to identify opportunities and deploy the most effective investments to capture them.
In short, you’ll likely need financial leadership — a CFO or controller — with more experience than your staff accountant or bookkeeper offers.
For instance, an important step in the growth of a middle-market business is taking on debt to provide working capital without reducing anyone’s ownership. To do this effectively, you’ll want a finance leader who has experience in setting up lines of credit, negotiating with banks and helping you comply with the resulting debt covenants.
You’ll also want someone who can enhance the company’s cash flow and operational planning, with a longer timeframe for those plans. Instead of the six to 12 months most startups look ahead, you’ll need to think about your growth, operations and financial results two to three years from now.
Better Information, Better Decisions
Your CFO or controller will also start to prepare more professional performance reports that will help management make better decisions. The board, investors and lenders will want updates that go beyond profit and loss statements to include detailed narratives about market conditions, trends and competitors, as well as operational reports about the company’s strategy, people and operations.
At the same time, the finance leader will help the company enhance its financial processes and optimize its technologies. The basic financial tools (like QuickBooks) that helped you reach the middle market probably won’t be sophisticated enough to help you automate key financial processes, or they may only provide basic information that doesn’t support effective decision-making.
In these situations, you should explore cloud-based customer relationship management (CRM) and enterprise resource planning (ERP) tools that provide business leaders with deeper insights into what’s going on behind the P&L numbers.
The CFO or controller will also be asked to help management review their strategy. Typical questions in these discussions will include “how is the company executing,” “where are the opportunities,” “do we need to revamp this strategy” and other key decisions. If the long-term plan includes going public or selling the company, the finance leader can play a key role in setting up processes and systems to reach that eventual destination.
Hiring a full-time CFO or controller is one way to get the finance expertise you need (note that competition for talent can be fierce). Many companies don’t need a full-time professional at this stage of growth, however, so hiring an experienced fractional or interim finance leader is another route to consider.
A fractional CFO or controller works with one or more companies on a part-time basis. An interim CFO or controller joins the company’s management team for a designated period, such as until the company completes a financing round. Either can be a cost-effective way to get the specific expertise you need.
Having the right finance leadership is critical to your company’s continued success. The more professionally your business begins to operate, and the earlier it does so, the more value it will be able to generate during its development stages, its ongoing operations and as you pursue an exit or other strategy.
Interested in a fractional or interim CFO or controller? Learn more about our services here.
Jenn has more than 25 years of outsourced accounting and finance experience, with a particular expertise in startups and the advertising and creative production industries. She is passionate about seeing companies utilize the latest accounting technology to maximize their efficiency, productivity, and ultimately, success.
Before joining Armanino, Jenn founded and led Team Jenn Corp., a firm dedicated to the strategic financial management of startups and small businesses, offering a comprehensive back office solution with accounting, finance and HR solutions. Previous roles include stints at advertising giant Ogilvy and Mather, and in the cash management industry.
Jenn has a bachelor’s degree in economics from Pepperdine University and is a member of several professional associations including the National Society of Accountants, ProVisors and the Women’s Business Enterprise Network.
Co Authors :
Ryan heads the Strategy and Transformation consulting practice, providing management consulting, assessments and roadmaps for clients in all of Armanino’s business segments. He has extensive business, technology, cybersecurity and operations leadership experience in Fortune 50, mid-market and entrepreneurial environments, and has led global teams in the Americas, Asia and Europe.
He has held line leadership and consulting roles in a range of industries, including retail/consumer goods, entertainment, hospitality, technology, healthcare, biotech and financial services. His multi-functional experience includes strategy, technology, product commercialization, innovation, operations, solution delivery, process improvement and management consulting.