New on FinoLib · Volume IV: Finance Careers
I have just published a new article on FinoLib, my free finance education library: How to Build a Finance Function: Five Stages From One Person. It is part of Volume IV: Finance Careers. Below is a summary of the topic in plain, expert language, so you can follow the idea even before you open the full article.
D.1 Stage One — One Person Doing Everything
The idea in plain words
In the earliest stage, with under about 30 employees, finance is usually just the founder plus an outside bookkeeper. The first in-house accountant makes sense once the outside firm’s fee, which grows with volume, exceeds the fixed cost of a hire. But slow month-end closes and stalled investor checks often force the hire earlier.
Key points
■Typical scale: pre-Series A, under about 30 employees, revenue from zero to a few million dollars.
■The founder keeps the plan and approves payments; the outside firm keeps the books.
A closer look
At a very early-stage company (typically pre-Series A, under about 30 employees, with revenue anywhere from zero to a few million dollars) there is usually no dedicated finance hire. The one person doing finance is the founder or CEO, who keeps the planning spreadsheet and approves payments, while an outside accounting firm or bookkeeper processes transactions and prepares basic monthly statements without any strategic involvement in the business.
Recap
Under about 30 employees, finance is the founder plus an outside bookkeeper. The first in-house accountant pays for itself once the outside fee exceeds the fixed cost of a hire.
D.2 Stage Two — The First Real Hires
The idea in plain words
At Series A, the company has roughly 30 to 100 people and $1 to $10 million of revenue, and the first one to three finance people arrive. Often it is because a fundraise needs more rigor than the founder can supply.
Key points
■Triggers: a priced round, transaction volume, regular board reporting.
■Roles exist only as tasks, so segregation of duties is the first audit finding.
A closer look
The first dedicated finance hire usually comes at Series A (typically 30–100 employees and roughly $1–10 million of revenue) and is either a controller-type generalist, to bring bookkeeping in-house and clean it up ahead of fundraising due diligence, or, increasingly, the company’s first CFO or Head of Finance, hired because a fundraising round demands a level of financial rigor and modeling the founder can no longer credibly produce alone. The whole team is typically one to three people.
D.3 Stage Three — The Scale-Up Build-Out
The idea in plain words
With 100 to 500 employees and $10 to $100 million of revenue, the Controller and FP&A functions split into separate teams, about 4 to 25 people in total. The build-out follows trigger events: a full-scope audit, a priced Series B or C round, the first foreign entity, complex contracts and an IPO plan.
Key points
■An audit demand brings a Controller with audit experience.
■A priced round separates FP&A from the books.
A closer look
This is the stage described in Part B.6: High-Growth Startup / Scale-Up: roughly 100–500 employees and $10–100 million of revenue, with a finance team of about 4–25 in which dedicated (if still small) Controller and FP&A functions separate from one another as distinct roles rather than tasks shared by generalists, while Revenue Operations typically grows under the chief revenue officer. Cash runway management and fundraising readiness remain the CFO’s dominant personal focus, but the CFO no longer does hands-on bookkeeping or model-building.
D.4 Stage Four — Specialization Begins
The idea in plain words
Past about 500 employees and $100 million of revenue, finance grows to roughly 25 to 100 people, and specialist functions appear. Events like an IPO, a large debt raise or a first major acquisition can trigger several of these at once.
Key points
■An IPO or public debt creates Treasury and Investor Relations.
■Multiple tax jurisdictions bring a Tax Director in-house.
A closer look
Somewhere past about 500 employees and $100 million of revenue (finance of roughly 25–100 people), and very often triggered by an IPO process, a large debt raise or the company’s first major acquisition, distinct specialist functions appear for the first time. This is the stage where the finance organization starts to resemble the fully built structures described in Part B.
D.5 Stage Five — The Fully Specialized Function
The idea in plain words
At 2,000 or more employees and revenue above about $1 billion, every function is its own team and splits into sub-specialties. The CFO stops doing the work and instead orchestrates the interfaces between teams, making sure the pieces fit together.
Key points
■Finance typically runs from 100 to several hundred people; thousands at the largest.
■Controllership splits into close, revenue, technical accounting and SEC reporting.
What the full article covers
In the full article I take you through these sections:
■D.1 Stage One — One Person Doing Everything
■D.2 Stage Two — The First Real Hires
■D.3 Stage Three — The Scale-Up Build-Out
■D.4 Stage Four — Specialization Begins
■D.5 Stage Five — The Fully Specialized Function
It includes worked examples, a recap, a reveal-on-click quiz and the official sources behind every figure.
Volume IV: Finance Careers
Read the full article on FinoLib
The complete article, How to Build a Finance Function: Five Stages From One Person, with every worked example, diagram, quiz and source, is free to read in Volume IV, Finance Careers on finolib.com.
Explore the Finance Education Series: Vol. II — Capital Markets · Vol. I — Global Economy · Vol. III — Finance Encyclopedia · Vol. IV — Finance Careers · Vol. V — Personal Finance