As a small business begins to grow, one of two things occurs: either the founder begins taking on more of the company’s responsibilities in terms of accounting, marketing and operations, or they begin to invest in people with expertise in these areas.
While many entrepreneurs understand the latter as a natural part of their small business’ evolution, they don’t often know when to make the transition from having a leader wearing multiple hats to dividing up the work among specialists to the company’s benefit. And it’s missing this window of opportunity that might very well lead to an overworked leader or a small business slowly coming apart at the seams.
Being Accountable for Small Business Accounting
Of all the divisions in a small business, few are as valuable to the company as the area of finance. In the early stages of a company, the accounting process might be a simple enough task that CEOs can use internal accounting software and outside firms to take control of their finances; but as the incoming and outgoing capital, as well as investments within the organization become more complex, the need for a financial expert increases substantially.
Mike Henderson, finance chief of Lendio, conveyed this same message in an article in The New York Times , saying, “When the C.E.O. is being distracted from critical revenue-generating activities to handle financing or similar issues, it’s time for the C.F.O. to take his place and make these things happen. Once the C.E.O. starts to feel the pain, act quickly, because a good C.F.O. can provide tremendous unforeseen support and help avoid some of the growth problems companies face.”
I had the opportunity to speak with the host of CFO Thought Leader, Jack Sweeney, on his business podcast , where we discussed the importance of good financial practices within small businesses. I cannot emphasize enough the impact of the ability to create timely financial statements, generating “good” data from which decisions can be made, can have on a business. Especially as the business is preparing to scale.
Avoid the Financial Faux Pas
As a company who provides private equity funding for second stage companies , we have a profound interest in the financial health of small businesses. In fact, it’s the foundation of our own process, The 5 Pillars of Business Freedom .
On our radio program, The Second Stage , we discussed this topic at length with an expert in entrepreneurial accounting, Greg Crabtree, author of Simple Numbers, Straight Talk, Big Profits – 4 Keys to Unlock Your Business Potential, who offered tremendous insight on the subject. During this episode, Mr. Crabtree dove into the 4 Keys he wrote about in his book and continues teaching as a central philosophy to entrepreneurs needing small business financial advice. A written synopsis of the show and the author’s 4 Keys can be found here . As you listen and read, remember to always have Passion for Possibilities!