Starting point and challenges
In today's dynamic business world, SMEs and start-ups face the task of creating a finance set-up that is not only efficient and flexible but can also adapt quickly to changing market conditions. Many companies of this size initially focused on product development, recruitment and sales, neglecting to build a solid financial infrastructure. Yet as the company grows, so do the demands placed on the finance function – both internally, to support management decisions, and externally, to meet the expectations of investors and regulators.
Companies of this size increasingly need to spread tasks and responsibilities across several shoulders in order to handle them sustainably. This applies in particular to administrative areas such as finance, which were not the focus in earlier stages of the company, and it raises questions about how tasks should be allocated among staff and which processes and systems are relevant.
Below, we examine these aspects and set out concrete proposals for an effective and scalable set-up.
Building and structuring the finance set-up
An effective finance set-up for SMEs and start-ups should strategically cover the following core areas:
- Financial planning and management: This covers preparing plan figures (budgets), producing regular financial forecasts and adjusting the budget in line with current business developments. It supports management in strategic decision-making and helps to ensure financial stability.
- Operational accounting and controlling: Accurate recording and analysis of actual figures is essential to ensure effective controlling and reporting. This includes plan-versus-actual comparisons, which make it possible to respond quickly to variances.
- Compliance and regulatory management: SMEs and start-ups must continuously ensure that they comply with all tax and commercial law requirements. This includes meeting the deadlines for preparing annual financial statements and paying taxes correctly.
- Financing and raising capital: It is crucial to identify and secure suitable sources of financing to support the company's growth and operational flexibility.
Integrating external expertise
Bringing in specialist service providers such as tax advisors, accounting firms and CFO-as-a-Service can make a significant contribution to the efficiency and scalability of financial management. These providers not only offer expertise and support with day-to-day financial administration but also contribute strategic perspectives on growth and optimisation.
Cost efficiency through external service providers
SMEs and start-ups benefit considerably from the cost efficiency of external finance service providers. Thanks to their specialisation and experience, they can often deliver services more cost-effectively and more effectively than internal resources. The flexibility to use external resources as needed also helps to keep fixed costs low and maximise financial flexibility.
What efficient, dynamic collaboration looks like in practice:
Tax advisors: Tax advisors are often a company's first financial advisers from the moment it is founded. They handle not only tax matters and the preparation of the annual financial statements but frequently also the monthly financial accounting and payroll in the early years. As the company grows, however, it can be advisable to gradually bring certain tasks in-house or outsource them to specialist providers such as accounting firms in order to increase efficiency and scalability.
Specialist accounting firms: These firms often handle payroll and financial accounting more cost-effectively than traditional tax advisors. For example, outsourcing payroll to a specialist provider could save up to 6 euros per employee per month – for 50 employees, that means annual savings of up to 3,600 euros.
CFO-as-a-Service firms: These modern service providers give SMEs and start-ups professional support in finance without significantly increasing fixed costs. They offer support in areas such as reporting, fundraising and M&A, as well as in optimising financial processes and systems. Their flexibility makes them a particularly valuable addition before an internal finance department has been built. They can also act as advisers in every phase of a company's development, taking pressure off management and the finance team.
Internal finance department: In the first few years after a company is founded, there is often no internal finance department – and for good reason, as the costs and administrative effort can be high. Once a certain company size has been reached, however, gradually building an internal department makes sense. CFO services help companies manage this transition efficiently and avoid unnecessary costs during the build-up.
Benefits of an optimised finance set-up
A well-designed finance system offers wide-ranging benefits:
- Improved financial performance: A clear financial structure supports better financial management and can lead to higher profitability.
- Greater transparency and control: Regular reporting and professional controlling increase financial transparency, leading to better-informed and more effective decisions.
- Risk minimisation: Professional service providers help to identify and minimise financial risks, which is particularly critical for growing companies.
- Strategic flexibility: The company remains able to respond quickly to changes in the business environment.
Cost optimisation through CFO services compared with a traditional CFO
An optimised finance set-up offers numerous benefits, including improved financial performance and stability, greater transparency and control over finances, and the ability to respond strategically and proactively to changes in the business environment.
But CFO services also offer a concrete financial advantage:
Our clients already have a tax advisor and an accounting function. In our experience, professionalising financial management and controlling requires at least the following:
- Monthly rolling reporting
- Monthly budget comparison
- Profitability analyses
- Professional investor management
- A structured monthly exchange with operational managing directors on potential improvements
- Ongoing improvement of financial processes for accuracy, efficiency and compliance
For growing companies, hiring a full-time CFO or senior controller is often a lengthy and costly solution. Traditional CFOs in full-time positions are not always fully utilised, which can tip the cost-benefit balance unfavourably. By using CFO services, companies can save significant costs – often up to 100,000 euros a year.
Another common problem with traditional hiring is that a single CFO may not be able to cover all the finance requirements of a dynamic company. As a result, either highly paid staff end up spending most of their time on routine tasks such as merging Excel spreadsheets, or additional analysts have to be hired at a fully loaded cost of 70,000 euros a year to meet analytical and strategic needs.
Service providers such as Nortos offer an efficient alternative here by providing CFO services with better value for money. Our solution is to give clients a team of finance experts who work as part of a flexible retainer package. These teams use a standardised stack of finance software and automation solutions, which further increases efficiency and improves financial transparency and process quality. This enables SMEs and start-ups not only to reduce their costs significantly but also to achieve greater flexibility and scalability in their financial management.
Conclusion
It is vital for SMEs and start-ups to develop a robust, future-proof finance set-up that forms the basis for sustained growth and success. By strategically integrating external experts and using advanced financial technology, these companies can create a solid financial foundation that allows them to focus on their core business and meet the challenges of a rapidly changing market.
We invite you to talk to us and explore how your company can benefit from an optimised finance set-up. Let us work together to make your financial management more efficient and equip your company for future success.
