Is it time for an in-house finance team?

Changing accountants or making a finance hire? Find out what route is best for your company

There comes a time in every startup’s life when the founder and their team need to make a choice. Is it possible to carry on with the accountants you have used since you started, or is it time to begin building an internal finance team?

In this article, we’re going to ask four questions. If the answer to any of these questions is ‘yes’, it’s probably time to make a finance hire.

1 - Are you wasting too much of your time on accounting tasks?

Time is money. If you’re spending too much of your own time on your accounts, you aren’t spending enough time on tasks that drive your business forward – serving customers, improving your product, enabling your team to perform better.

The snag with accounting firms is that because they are external to your company, they need to ask questions, and you need to share information, such as the background to specific transactions. 

As your business grows, you get to a point where the time you spend helping your accountant is more valuable than the service they provide. Also, there may be additional data and compliance tasks that you need to complete that your accountants do not cover.

If this sounds like you, it’s time for a change.

2 – Have you just experienced rapid growth?

Accounting firms are excellent for smaller companies. They are brilliant at making sure your tax is correct and your payroll runs smoothly.

However, they are not set up to get under the skin of your business. They can’t implement the operational processes that you need to help your company grow.

If you have moved through the development phase of your business and into the startup phase, and you aim to keep growing in the future, it should become evident that you need more from your accountants than they can provide.

Here are some signs to look for that it’s time to hire a finance team:

  • New projects and overseas expansion – requiring robust processes in place to support the business, more than accounting firms can offer
  • Increase in customer and supplier numbers – if there are a lot of transactions to process, such as sales invoices and returns, you need more support than an external accounting firm
  • Time sinks in your business –financial tasks that take up too much of your time, such as manually adjusting the figures that your accounting firm has produced
  • Not obtaining the insights you need – for example, measuring profit margin by product

If you see these signs, changing accountants in favour of a finance team is the way forward.

3 – Are you being let down by your accounting firm?

Accountants are excellent at bookkeeping and payroll. However, running a fast-growing business is about more than bookkeeping and payroll. There are more ongoing tasks that need to be carried out by your external accountants as you grow:

Bookkeeping and accounting

These are the standard compliance and reporting tasks, ensuring your company’s books accurately reflect the transactions that take place. Often, there is a time delay, with an emphasis on historical figures for tax reasons and annual accounts. 

Accounting firms are set up for these tasks, but as your firm grows and there are more transactions to process, they may struggle.

Accounts and tax returns

You need to submit your year-end accounts to Companies House and your tax returns to HMRC.

Accounting firms are set up for this kind of work and are usually excellent at it, depending on your business's complexity.

Management reporting

Your management team needs timely and accurate reports, with translated and adjusted accounting figures, to make the right decisions in your business. For example, you need to be able to break revenue down by segment and product. 

Accountants can produce these numbers to a certain level, but from customers, it reaches a point where they ask for too much information and it becomes a time sink.

Payroll and pensions

Making sure your people are paid the correct amount on time is pretty crucial in your business! You also need to pay the correct personnel taxes to avoid HMRC fines.

Accounting firms do not usually have the experience to help with this, especially when adding contractors into the mix. Once your headcount reaches ten, you should start thinking about a finance hire.

Supplier management

Every business has to make sure its suppliers are paid the correct amount at the right time. You also have to make sure you are paying the correct amount to the right suppliers, to reduce fraud and error.

Accountants may help you raise invoices, but they won’t do much around ensuring that the amounts and suppliers are correct. However, your finance hires definitely will.

Invoice processing

You also need to ensure that your customers are invoiced on time and that they pay them. 

Accountants do not typically work around credit control and they won’t chase debts. 

It’s clear that while accountants are brilliant at some tasks, they struggle as soon as it gets more complicated. If you see this in your business, it’s time for a change.

4 – Are you projecting future growth?

If you aim to grow your business to a high level of maturity, you need to build for the future. This means adding people to your company with a higher level of capabilities, who can carry out a new set of tasks.

Process architecture

You need the ability to deep dive into the detail of your business, as well as your business’ future operations, to design and implement processes that can sustain growth. For example, you may need to restructure your sales process so your customers are invoiced on time, your sales (and cost of sales) are linked to your inventory, with the information captured to provide useful figures for analysis (customers, items, average length of payment etc.).

Accounting firms cannot do this work as they do not have the experience, skills or capacity. You can only do this with a finance team onboard.

Financial reporting

To plan your growth, you need to be able to measure the impact of a future decision by modelling specific scenarios based on present and future budgeted figures. For example, what is the effect on your business of investing in a new warehouse?

This is a specialised area. It requires knowledge of statistics, your business and the industry. Accounting firms do not have the bandwidth to perform this type of work.

Forecasting and budgeting

As you grow, you need to create budgets that hold departments accountable and aim towards a relevant, achievable goal. To do this, you need to calculate an accurate representation of what will happen in the future. 

Forecasting in this way requires an in-depth understanding of the business, the industry, future plans and projects. Accounting firms are not in the position to provide this service.

R&D claims

Companies that invest in developing new products, processes or services qualify for R&D tax relief. You can also claim if you invest in enhancing existing products. 

If you invest in innovation, you can submit an R&D tax credit claim to receive a cash payment. Alternatively, if you prefer, you can receive your claim as a Corporation Tax reduction. 

To do this requires a lot of information and analysis. Not all costs are eligible. You need to build a case that you can submit to the HMRC. 

There are accounting firms out there that might help with this, but they often charge a lot for this service as a percentage cut of the claim. 

Fundraising materials

If you want to raise investment to propel your growth, your reporting needs to be immaculate. Potential investors require concrete financial reports and forecasts. This is because, ultimately, they are investing in your business to get a return. You need to provide information on your financial processes to the level of detail they require.

Accounting firms will not help you with this, as they do not have the connections with investors, the experience, nor the capacity for the amount of work required to provide robust fundraising materials that achieve the most significant investment. 

Find out more from Quantico

If you have answered yes to any of these questions, it’s time to start building out your in-house finance team.

At Quantico, we’re a team of FinOps experts. That’s Finance Operations – where finance, operations and technology meet. We provide in-house finance teams to fast-growing businesses just like yours, giving you the systems you need to scale, without the admin and hassle.

If this sounds like the way forward for your business, visit our site today.