‘Best practice’ in the finance team is challenging to define for seed and early-stage tech businesses. Some companies may need access to a Finance Director immediately, whereas others may only require this resource once they reach the next funding stage.
Specialist providers can help solve the challenges encountered by seed and early-stage tech businesses with affordable and flexible accounting services. These services support early-stage tech businesses to establish accounting best practice and a proportional finance function with all the accounting essentials from which they can scale.
Meet the accounting needs of today first to achieve manageable growth tomorrow
For many seed and early-stage technology businesses, appointing a full-time finance resource is likely to be unnecessary and financially out of reach.
We often find that the founders get caught up managing day-to-day accounting and finance tasks in the early stages of growth. However, there are effective and affordable alternatives for growing tech businesses to build a finance function and establish accounting best practice, leaving the founder free to focus on revenue-generating activities.
From the outset, basic accounting and finance tasks, such as:
- Invoice processing
- Payment runs
- Preparation of management accounts
- Releasing payments to suppliers
- Payroll
- Budgeting and forecasting
should be manageable with an ‘out of the box’ accounting service without hiring a dedicated resource.
When the CEO requires a deeper, more experienced financial perspective, a part-time finance director with sector-specific experience and commercial awareness is readily accessible from providers like iFD. This resource is available on an ad-hoc basis for a particular finance challenge or on an ongoing basis once a month to a couple of times a week.
Related | Start-up FD; who are they, and why are they different?
What about fundraising?
As early-stage businesses grow, they reach an inflection point; rather than being just a functional body performing basic accounting and finance tasks, the finance team evolves into a strategic partner focused on scaling the business and generating investment.
Implementing accounting best practice guidelines within the finance team positively impacts a business’s ability to fundraise.
Related | How to find and secure growth funding
Receiving investment introduces another layer of complexity in terms of reporting requirements and additional levels of accountability, especially since private equity and venture capital funds are highly prescriptive and often demand strict criteria.
Investors also expect immediate access to business insights, so the business must have the ability to manipulate and interpret data using analytics platforms and automation tools such as Power BI.
Fundraising also marks an important transition from cash-constrained activities to spending more cash on research and development-focused activities. As a result, the sudden potential to recover over 30% of qualifying R&D expenditure through the government’s tax relief scheme becomes more urgent. As a result, the need for accounting best practice is even greater.
Related | R&D Tax Credits – don’t miss out on this valuable source of funds
Food for thought: Accounting best practice – what is next?
Implementing accounting best practice during the early stages of growth allows the business to grow and scale with the appropriate and proportional accounting and finance resources in place.
Identifying when a finance director is required may be challenging but once onboard, they unlock valuable time for the CEO. Once a CEO begins to devote more time on accounting and finance tasks it’s highly likely they could benefit from the accounting and financial rigour that a finance director provides.
Reaching each threshold of growth is like opening a door. However, to do this you need a key, and it just so happens that often the key is to ensure accounting best practice.
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