For a portfolio company, future-proofing the finance department is integral to maintaining flexibility as the business navigates investor demands, fast growth and potential changes in the economic environment. While product development, sales and other revenue-driving initiatives ramp up, deprioritizing investment in finance operations diminishes focus and ignores important guardrails that are likely to impact growth down the line.
The value of finance operations in portfolio companies
A portfolio company’s finance and accounting team is more than simple number management. Flexible finance operations add value by driving faster decision making and creating strong business cases to the company’s investors.
Ultimately, your business’s finance function needs agility to help meet growth targets. This doesn’t necessarily mean that the finance function needs to work faster or longer. Instead, it needs to be able to do the following:
- Focus in on key strengths that drive profitability
- Identify risks and opportunities more efficiently to pivot strategy
- Create capacity for growth through the necessary skills and technology
- Automate and standardize processes to deliver accurate, timely reports and insights
Compliance and reporting consistency builds needed trust
Companies will look to their finance departments to maintain compliance with government requirements and paperwork. For investor-backed companies, this standard is especially high and requires frequent reports and filings.
A founder or CEO must also be able to answer to its board when important or unexpected questions arise. Avoid being caught off guard or lacking visibility and understanding of your numbers. The ability of your finance and accounting team to close the books on time and provide timely reports allows you to back up your decisions with the proper information. And you’ll improve investor trust when being able to explain, for example, high or low spend, a new major hire or which contracts can be renegotiated to manage costs.
Agile finance operations build value for future fundraising rounds
Consistent communication about your financial health is important between funding rounds. But just as important is preserving your valuation and having a flexible finance department to continue to execute when growth is threatened. Whether that means forecasting or reassessing KPIs to stay ahead of challenges, a tight finance operation is always looking ahead. Without financial discipline and agility now, the company can find itself missing fundraising opportunities later.
Strategic guidance keeps the business on course
To grow quickly, your business can’t be swayed off course. Strategic guidance places focus on key drivers, operational strengths and profitability to accelerate growth. Without it, portfolio companies may lose time and resources following the wrong north star or tracking irrelevant metrics. An agile finance operation is one that sticks steadfast to the most effective goals to meet expected targets.
At a portfolio company, the finance team will need to dig into the balance sheet, reviewing fixed and variable costs to understand the business’s operating leverage. An agile finance function will deliver greater visibility and transparency into the company’s health to identify gaps and improve on deficiencies before they become a larger cost. What operations are most crucial and which ones no longer add value? Where can you trim the fat, and what skills or resources are still necessary to execute against your plan more successfully?
Raise your technology game to build capacity
Data is key to a business’s success, as gleaning insights helps uncover opportunities for value creation. Implementing the right technology will help determine if KPIs are being met and automate processes that free up time for management to focus on growth and show their strengths to the board. Finance talent with an understanding of specific platforms and implementation will be of value to portfolio companies during a digital transformation.
Hire the right talent to scale
Portfolio companies can add extra value by hiring flexible finance talent as a scalable solution for future growth. Engaging remote, part-time talent allows your business to find the right skill sets, unencumbered by geography. It also allows your company to create a cost-effective model that avoids underutilizing full-time talent or committing to full-time salaries. Building a team that can meet changing levels of demand and capacity will create greater agility for your business.
Invest in your finance function’s core competencies and future-proof your business as you grow. Paro provides controller services and accounting solutions to businesses at any stage to engineer long-term growth. Solve your core challenges with expert talent, data-driven tools and guiding insights.