Startup owners need to juggle multiple responsibilities when launching and scaling a venture. They manage everything from product development and finance to HR and marketing. However, as you work on your firm’s growth trajectory, it’s only by having a solid team of trusted, specialised professionals that you can achieve your goals.

When scaling, it is natural for startups to focus on hiring, with an emphasis on talent that can oversee product, business development, marketing and building the sales funnel. It is usually believed that these functions directly affect revenue growth and help attract more investment rounds. While that is true, an area that’s clearly ignored is the scaling up of finance department leaders. 

At an early stage, every startup needs a full-fledged finance team for two core functions, namely financial data capture (accounting) and analysis (business intelligence and FP&A). 

Thus, every startup finance team eventually needs to include both a CFO and an FP&A expert. These professionals can offer the required financial guidance to the scaling venture and perform key tasks like budgeting, reporting, forecasting, and scenario analysis. Moreover, an FP&A specialist can help define strategies and make data-driven decisions.

If you are a startup owner looking to scale your venture, we have a few compelling reasons that may convince you to hire an FP&A expert soon.

1. Ensures Effective Cash Flow Management 

Healthy cash flow is the lifeblood of a startup. Running out of funds is the second most common reason why startups fail. Any venture can fail in the absence of adequate liquid. By understanding your startup’s cash flow, you can scale your business while avoiding the financial hurdles. 

An FP&A expert can help by mapping a path that achieves a startup’s financial goals. Every startup needs a realistic plan that determines how much money is needed for scaling and how long it will last. This helps verify the venture’s profitability, liquidity, and capital cash position. 

Such valuations are largely compiled by FP&A teams who analyse past performance for projecting financial results into the future. 

2. Builds Financial Models for Strategic Planning

Every startup needs to raise capital to prepare for its growth phase. Having a viable financial model can help you gain clear visibility of your startup’s finances. A financial model is a numerical expression that uses a business’s actual revenue and expenses to express the venture’s goals and predict your financial performance. 

FP&A teams help startups build a strong financial model needed to make strategic decisions. These models show a startup roadmap, the progress towards targets, and how they can adapt their tactics and operations to stay on track. 

With the introduction of technologies like data visualisation and natural language reporting, FP&A teams can quickly analyse and visualise data and present their hypotheses in intuitive and accessible formats.

This empowers startup founders to convince investors to back their businesses. Moreover, the financial model highlights the key metrics and assumptions made when executing the business plan. 

3. Offers Information to Investors 

Regardless of how great your business idea is, you’ll need investors and banks to trust you with funding. Investors usually care about a well thought out business plan or pitch deck with clear evidence that your startup will obtain the necessary traction in the coming months.

They also evaluate the startup’s viability of raising additional rounds of startup funding if any progress is made. 

An FP&A expert can help you gather the necessary information needed by investors and venture capitalists for due diligence. They understand the market characteristics, the growth trajectory, and the operational complexities. Hence, they are in a great position to convince investors that the firm has the potential to grow and generate revenue. 

4. Offers Business Insights for Better Decisions

Unlike traditional finance teams, which rely on historical snapshots to make decisions, FP&A focuses on advanced and predictive financial analytics. They leverage the power of big data to generate robust forecasts and offer deeper real-time insights.

This means FP&A teams are better able to predict the future, allowing startups to massively slash the resources required to generate monthly close reports and annual budgets and forecasts. Even better, your company’s key stakeholders gain continuous visibility into the financial and operational health of the venture, enabling them to make data-driven decisions. 

Moreover, the CFO and FP&A expert determine the metrics or KPIs needed to support the business and drive shareholder value. For instance, monitoring the gross profit margin, current ratio, and net profit can help them identify trends and indicators of future pitfalls. This data then informs the founders’ major business decisions and strategies. 

5. Helps Future-Proof Your Startup Against Odds

Future-proofing is central to most businesses, especially startups, because the pandemic highlighted the importance of flexibility and agility in business. Investing in and implementing new technologies is a significant part of future-proofing. 

FP&A teams encourage the organisation to invest in software systems that mobilise business data for accurate forecasting, predictions, and models. With the right FP&A software in place, the future isn’t a blind spot.

Armed with more accurate projections and dynamically updated scenario models, business leaders are better equipped to proactively plan worst-case scenarios way ahead of time. 

6. Helps Teams Focus on Other Pressing Matters

Not all startup owners have a passion for managing spreadsheets and performing financial analysis. In fact, most business owners struggle to manage these complex tasks, as they aren’t commonly included among founders’ areas of core expertise. 

Financial planning and analysis can come across as a daunting task for startup owners who aren’t used to profit and loss analysis, budgeting, solvency analysis, and more. Therefore, it makes sense for startups to build a strong in-house FP&A team that can help them achieve success with cutting-edge financial planning. 

Besides, startup owners can focus on other critical aspects of their business like product development, marketing, and more. 

SUMMING UP

An FP&A expert can take a startup to a whole new level of financial excellence. They are specialists at evaluating the positive and negative impact of business decisions while showing you the opportunities that are otherwise missed. 

All this is because an FP&A professional goes beyond spreadsheets and generates valuable business insights by critically evaluating the market landscape. Unlike accountants or bookkeepers who only look at historical data, FP&A professionals are key partners to the firm, defining their strategy and making data-driven decisions. 

Hiring an FP&A expert is a proactive approach to supporting your startup as you scale and aim for sustainable growth. 

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