Schedule a Consultation

From $100 Million to $250 Million: How to use finance and accounting to grow your business (Part 1)

November 5, 2021 ROARK

Welcome to a two-part blog post on the topic of “From $100 million to $250 million:  how to use finance and accounting to grow your business.”  We’ll dive deep into how people, process, and technology can and should be used to help you continue to see massive growth.  

Growing the finance and accounting team will be important

From $100 million to $250 million, the company has grown and continues to grow in size exponentially. The revenue from the new bracket is approximately 2.5 times that of the old one, making it clear that we need to grow our team considerably to meet the needs of this change. What are some of the qualities that make for a good finance and accounting organization? How does this quality changes over time? The key aspects of structure in accounting or finance can change as a company evolves.

And things will change. You’ll put in more finance and accounting employees and have to have more management level, things like that as you grow the finance and accounting team. 

Organizational structure on finance and accounting

Organization structures depend on your ownership structure. For example, if you are a public company, this changes depending on ownership type into a private equity-built company or ESOP.

Industries with low margins are more likely to automate and do things differently than in other sectors. But when you look at this job level, typically, you’ll have an executive-level position. And we’ll talk about a finance person and how they might fit into the business. But then what happens is you start breaking them down into tiers. You have your accounting tier—typically, that becomes your controller.

Generally, accounting work is completed through a team of professionals that includes senior accountants and staff accountants. And then you’ll have managers overseeing specific departments, such as accounts payable (AP), payroll, accounts receivable (AR), and credit.

Your groups are only going to continue growing, so you’re going to want people staffing them. You typically have someone on the finance side, and they could either be doing a variety of things depending on the industry. On any given day, in most departments, there will be a finance manager leading that team.

A VP of finance usually has the most managerial positions, like a Finance Manager or Director. Financial Analysts are people who do the work for any of these higher positions.

Having worked in various organizations with different staff, you notice employees change as the company grows. One key aspect is that new accounting hires are often not brought in until companies expand their structure. You will start to see specialties such as cost accountants and project accountants. These kinds of specialists can help at the higher levels of management because you’ll have enough revenue to justify them.

Attracting great talent in finance and accounting

But one of the biggest challenges that I face is finding good people, not just finding people.

As a company grows, it needs to hire more people. Better employees and better systems make for fewer employees, which helps businesses become profitable. Look to specialists for help with accounting and finance roles. 

Use specialized recruiters in finance and accounting

To find these good people, reach out to specialist recruiters. If you’re in a company and your main business is manufacturing, your HR department and internal teams are likely experts at finding people on the shop floor.

In construction, they’re typically good at finding construction workers. Employers in the aerospace and defense industries usually can find competent engineers. But when you’re looking for people to fill accounting and finance positions, you don’t hire enough of these roles internally, making it difficult to find and retain great talent. There is not enough volume to stay up on the market; stay current. 

It’s like trying to stay on top of trends in the technology industry. That’s why I rely on my IT firm―they’re always at the cutting edge.

Specialized recruiters act as consultants in finance and accounting

Your recruiters should be consultants. When I meet with clients, it’s not about finding people they’re looking for; it’s about being a steady partner and helping clients find where they fit into current trends in the market.

They’re looking for people with specific skills. We’ll tell them if we know what they need, but sometimes they don’t, so we can help them out by suggesting different kinds of structures that might work well. This consulting provides incredible value and more than outweighs any recruiting fee you’ll pay.

Erik Roark has seen it from the other side of things when he was a CFO. “I have to tell you that it’s even more transparent to me now, as I see over larger data sets myself. Getting good people in there – who become game-changers for companies, especially at management and executive levels. We have helped these companies bring in the right people.” 

Critical skills for professionals in accounting and finance 

Consulting advice really helps from a recruiter in this stage of growth. Things are going to change in your accounting and finance departments. Instead of doing things manually, you need to rely on systems and processes. You’ll also need internal controls. Employees with a talent for systems are necessary for an advanced business. They’re best suited for those who deal with intricate details. If you don’t, you risk missing out on an excellent opportunity to make more money.

Excel skills continue to be important

We see many of our clients who prefer to use Excel. It’s what the skills are out there, and it’s incredible what can be done with Excel skills. However, we recommend that everyone try to move away from using Excel as much as possible and trust the systems instead.

Database mindset – Handling large datasets

That being said, the competency to handle large data sets is essential. It’s another when you have 200 lines of information, and then the data set starts increasing in size from 2000 to 20,000 or even 200,000. That’s where we use SQL and other reporting tools like Power BI and Tableau to handle large datasets.

To do this, your professional has to be able to move from the Excel mindset of manipulating data in tables and charts to using a database mindset for how information is inputted and extracted.

Like how do we input it? How do we store it? How do we retrieve it? And how do we present this information? Because now it isn’t doing a whole bunch of manual work. Now, we’re leveraging the system to accomplish everything that needs to be done from $100-$250 million in revenue. . When we reach this level on the scale, it’s not one branch office or another just down the street.

You may not be able to tackle the challenges of international data sets as quickly as you can handle regional ones–businesses and industries differ a lot. Multinationals often need to process data in remote environments, so it’s essential to use databases capable of handling these tasks.

Communication skills are key.

Communication is always essential, but it becomes even more crucial when bigger distances between you and your colleagues. Communication needs to be directed from employee to employee and needs to span the levels of the executive and management team at large.

I could see that just keeping up with the sheer number of people I would be in contact with daily–in addition to managing my duties–was a major challenge as I considered adding more people.

Technical Skills in GAAP

It is essential to have technical skills, and those skills will change as your business grows. You’ll want to find people with skills in GAAP-based financials.

Moving organizations toward GAAP-based Financials

Organizattions will need to move to GAAP-based financial statements.  Certain companies will stick to cash basis accounting because it is beneficial for tax purposes. When a company’s revenue reaches $100 million, moving to accrual or GAAP-based accounting model is necessary.

Concerning taxes, as all of you companies out there would like to use the cash or tax power basis for your filings, please don’t forget that your CPAs are capable and well-versed at adjusting those returns. The most compelling reason to switch is from an internal reporting standpoint: it removes all noise.

Here’s a story from a project.  We met with an owner to discuss their business when we found out that April had been a terrible month. We looked at the revenue and cash flow, but it wasn’t until we realized why April was such a bad month until we looked at expenses

The company’s employees were paid on a schedule based on when the paychecks were issued, not the end date. So it only seemed like April was terrible, but there was no problem with payrolls for that month once you take out that particular check. It was actually a bad month in March, but it looked better because there were no payroll accruals reported.

That’s important because it helps you place things in their appropriate context and when they occur. So your revenue and your expenses are matched. However, you’ll need to change to GAAP-based financials because, at this point, you’re going to need funds for growth. GAAP-based financials are required.

As you grow your business, it may be necessary to take on debt. This is often done to purchase equipment and even a new building. All banks the financial institutions are going to want to see GAAP-based financial statements, and at this level, they are probably going to review or need an audit just depending on the amount that you pay.

If you’re looking for any kind of investment partnership, like mezzanine capital which can help with growth and M&A, they are going to require GAAP financial statements. And a CPA will be the ones doing the audits that they need or reviews. All of this information is going to culminate into really needing your GAAP-based financial details.

Now’s the time because you’re large enough to make that change. If you haven’t already, I will encourage you even to do it before. But now is really the time, where companies who don’t change could face a missed opportunity in an event they can no longer reap as much from the switch.

Finance and accounting become separate teams

So, accounting and finance are two different fields that inform each other. As such, the accounting group is good at reporting what has happened and putting it into the suitable buckets so that this is accurate. Your accounting team should be great at reporting internal information, in addition to helping managers. As the company grows, your accounting team will act as a finance department, but it can be handled differently and, as you grow, its department. At this level of revenue, there are so many transactions happening that the numbers create such a large volume of work.

If you even find a little change that makes an impact (even 1% of the volume) that becomes significant. So the finance team has expertise in a particular skill. They’re going to be digging in, giving you projections and information to make better decisions, and that will affect your bottom line even if your accounting group can do some of that as well. They are experts who can bring strength and value.

It’s kind of like if you go out and you go to an ice cream shop or if I go to the grocery store, they have all sorts of different ice creams there. But nothing beats going to my local ice cream shop as it makes fresh batches right in front of your eye – homemade. It’s just very specialized and very different.

If you have any questions about growing your business from $100 million to $250 million and how finance and accounting can help you do that, we’d be happy to discuss that with you.    Be on the lookout for Part 2 of this topic as we’ll dive further into how ownership structures, mergers and acquisitions, and systems in finance and accounting will aid you in growing to $250 million.

 

You can contact us at ROARK here.

 

Like this series?  Check out each of them in our series,  From startup to $250 Million:  How to use finance and accounting to grow your business.

From startup to $1 Million:  How to use finance and accounting to grow your business.

From $1 Million to $20 Million:  How to use finance and accounting to grow your business (Part 1) 

From $1 Million to $20 Million:  How to use finance and accounting to grow your business (Part 2) 

From $20 Million to $50 Million:  How to use finance and accounting to grow your business (Part 1)

From $20 Million to $50 Million: How to use finance and accounting to grow your business (Part2)

From $50 Million to $100 Million: How to use finance and accounting to grow your business (Part 1)

From $50 Million to $100 Million: How to use finance and accounting to grow your business (Part 2)

 

 

Share This: