Building a Strong Finance Department for Your Start-Up

AUTHOR: Mahlet Tamene, Director of Finance

Month-end, quarter-end, half-year and year-end are all too familiar terms you hear when you work in a finance function.

Terms such as P&L, balance sheet, cash flow statements, debit and credits are thrown about loosely when you walk onto a finance department floor; and for anyone new to it you will probably think you need a whole new dictionary just to understand finance. 

At the beginning of this year I took a trip back to the motherland, Ethiopia, to celebrate Christmas (this is celebrated in January). I have spent a majority of my life in the UK and always wondered what it would be like to work there. Before I touched down in Africa I reached out to Gebeya’s CEO, Amadou, to set up a meeting to get his insight. On the day of our meeting I embarrassingly rocked up 3 hours early as I mistakenly forgot to update the timezone in my calendar!

What was meant to be an informal discussion resulted in a proposal that I could not resist: the opportunity to join a start-up in a new continent and industry to help build a strong finance department. Having worked in large international corporations for the majority of my career I have been fortunate in being exposed to learn about and experience the multiple teams and sub-teams required to form a solid finance function. These range from financial reporting, financial accounting, tax, internal audit, strategy, treasury. Going from a corporate to a start-up there is one noticeable difference; these roles are centralised to a few individuals, with the CFO and FD wearing multiple hats.

So here are my key takeaways for setting up the core finance functions which are critical to your start-up, whatever industry and continent you are in:

1. Cash Management:  A common phrase you will hear in the accounting world is  “Cash is King”. This often refers to the importance of cash in a business. Monitoring and forecasting  your cash position at every stage of the growth is crucial. Having the right tools to monitor and control it is even more important. I think I might have built a reputation for being “tight-fisted” at Gebeya but I say I am prudent, hence why “Cash is Queen” ;-).
2. Financial Accounting: As boring and monotonous as it sounds, having a grasp of the accounting standards your organisation uses is important.  Whether it is GAAP, IFRS, IFRS for SME these accounting standards are the scriptures to your financial statements. At the beginning of the startup journey you may still want to rely on external accounting firms. As your business grows think about bringing it in house as understanding these will help drive some of the strategic decisions. 
3. Financial Process: From invoicing your clients, to collecting cash, paying your staff and reporting your results, streamlining your financial processes are crucial to have implemented. Plan out and document all your financial processes, work with other departments to understand your process too. Having this in place means your organisation will be ready to scale with ease when the time comes. The accounting systems and applications you use are also important. As things are moving into the digital world consider the platforms that are more relevant to your organisation. 
4. Financial Reporting: Streamlined financial processes leads to efficient and accurate financial reporting. Financial reports are key to monitoring the health of your start-up. Setup and define key performance metrics that you can monitor. 
5. Strategic Planning: In a start-up, the finance department plays a key role as a business partner to the CEO. Accurate finance reporting aids your business to tell the story of your organisation and make strategic business decisions.  
6. Tax: There is no getting around it, we all need to pay our share. Do you know and understand the tax law of the region you operate in? Consider getting an external advisor to ensure your organisation is set up as tax efficiently as possible.  Getting this wrong could significantly impact your margins and may drive your strategic business decisions. 

In summary, whatever stage of your start-up—whether it is a one woman/man band or you have the resources to hire a team—it is better to start earlier to lay the foundations for a strong finance function than later.  What started off as an informal discussion with Amadou led me to be part of this journey to help paint Gebeya’s Finance roadmap, the challenge is exciting.  

#Africa #Africanstartup #CashisKing #Accounting #Gebeya #AfricanTalent