Making your First Accounting & Finance Hire in your Startup
Considering making your first Accounting & Finance hire? Investing in a new Accounting & finance hire is a great way to get better insight into your startup's finances, stay ahead of investor requests, and ensure your financial operations are running smoothly.
There are various roles within an Accounting and Finance department, and understanding the specifics of these roles will help you decide which is the right role for your startup. But before we can understand that, let's first cover the two sections that make up a typical accounting and finance department.
Your accounting and finance department is split between:
1. FP&A (Financial Planning & Analysis)
Financial Planning & Analysis typically includes items like your financial modeling and forecasting, board reporting, and budget to actuals, while Accounting typically consists of items related to bookkeeping, or operational items like processing payments to your vendors or invoicing and collecting from your customers, processing payroll and other accounting specific items.
Here are some of the roles that are common in an Accounting and Finance department:
The hires on the left are more accounting focused, while the hires on the right are more FP&A focused. As you get higher up the tree, you have more overlap between the two. Now let's cover each in greater detail.
First we're going to start with a bookkeeper. Common alternate titles that you would hear from a bookkeeper are staff accountant, or junior accountant. It's also possible that you're hiring junior level specialist to process payments to your vendors, or to collect on your customer's (AP clerk or an AR clerk).
The most obvious pro to hiring a bookkeeper is that they are very cost-effective. In fact, if you were to hire a full-time bookkeeper, you'd probably be paying anywhere between $45k to $65k a year if you're in the US. If you hire them on a fractional basis, then the cost would be a few hundred dollars a month.
The cons of a bookkeeper is they need frequent instruction and can’t make decisions on their own, in addition to the fact that they usually don't get involved in the FP&A.
It's rare for a bookkeeper to have experience with preparing a financial model, a budget to actuals, or anything else FP&A specific.
FP&A analyst is like a bookkeeper except that it’s on the Financial Planning & Analysis side.
Here too the pro is that just like a bookkeeper, they usually are cost-effective, though probably are going to be a little bit more than a bookkeeper. I would say you're looking at maybe $65k to $85k for an FP&A analyst.
The cons are also similar to hiring a bookkeeper: they're not always able to see the forest from the trees. They can’t make their own decision. They oftentimes need guidance. So, they're great whenever you're able to provide that instruction, but if your current team doesn't have someone who understands what exactly is important to set up in the company, it may not be best to go straight to hiring an FP&A analyst. Additionally, oftentimes they have very little to no experience with anything related to accounting. Usually their backgrounds are more finance related, or it could be just data in general.
A Senior Accountant is again on the accounting side of things. An alternate title for this is Assistant Controller. This is someone who has graduated from a Staff Accountant to a Senior Accountant. They know their way around things. They're familiar. They have experience, but at the same time, they don't have complete independence.
Senior Accountant's are typically not able to run a department entirely on their own, hence, they need additional instructions. In addition to that, it's rare for a Senior Accountant to also get involved with FP&A, so when it comes to board reporting, you would need to fulfill that through some other means.
An FP&A manager is again similar to a senior accountant, but on the FP&A side. With an FP&A manager, the pro is that they could oftentimes run the entire FP&A process of a company. The con is that there is usually very little overlap with accounting, and they are usually not CPAs.
Instead, they just have a strong understanding of finance, how to present material to your board, how to manage information such as budget to actuals reporting and so forth. You could probably get a good FP&A manager, for $90k - $120k.
For a Controller, a similar title that you mighty hear is an accounting manager. This is a great role because oftentimes they are able to run the entire accounting department on their own.
Controller's have a strong amount of accounting experience, anre are oftentimes a CPA. The con, however, is that it's rare for a controller to get involved on the board reporting side of things, such as items related to the forecast and budget to actuals.
Controllers oftentimes control the actuals well. They have very good understanding of what happened with the company’s financials, but being able to then forecast what's going to happen and to bridge that gap, is not their forte.
For a good Controller you might have to pay between $110k to almost $175k
The next role is that of a VP of finance. An alternate title may be a Head of Finance.
A VP of finance is a great hire because oftentimes they're able to run the entire accounting and finance department. This is a hire that you make usually before having a CFO. This is kind of like CFO in training.
A VP of Finance has a strong amount of FP&A experience. Again, they're able to run that entire department on their own. It is worth noting that they are typically more FP&A focused and they oftentimes don't get involved with the accounting, but at the same time, a good VP of finance has a strong understanding of accounting, as well.
It's even possible that you have someone who's half and half, which would really be the sweet spot.
You can get a good VP of finance probably for about 110k to 190k.
And now we have the granddaddy of them all: The Chief Financial Officer The CFO pros are obvious: you don't really get higher in an organization than a CFO, when it comes to accounting and finance expertise, so they ideally have an understanding of everything involved in the accounting and finance department. They understand how to do all the journal entries, they understand how to set up a proper AP system, how to make sure your employees get paid efficiently, how to do budget to actuals reporting efficiently and effectively deep dive into that analysis.
At the same time, a CFO is expensive. For a good CFO, you're probably going to be paying north of $200k+ a year. In addition to that, they also don't get involved in the weeds. You're not going to hire a CFO and then say “go ahead and do a bank reconciliation”. You don't want to pay someone that much when you could hire a bookkeeper at $40k to $60k to do that. Oftentimes the CFO is one of the last roles that are hired in an organization.
For your Accounting & Finance department to run smoothly, my best advice is this: Hire someone junior, and ensure they have someone senior to get the proper instruction and management.
For a senior hire, this may be someone already on your team, like you or your cofounder. In this case, it would make sense to then hire a bookkeeper and have the person with the accounting and finance background give them instructions. While this can help keep all the costs low, it may happen that you find yourself being too much involved in the process when you'd rather have someone like a senior accountant to handle that role.
A Senior Accountant is a great role because that person has a good amount of experience, while they are also cost effective. They're not quite at the controller level, so they can't really run the entire accounting department. At the same time, if you have a hungry Senior Accountant, you could expose them to FP&A side of things, and then gradually they can get involved in both and grow ultimately into a VP of finance.
A Controller could also be a good first hire, but again, I wouldn't just hire a controller because this person is too senior. What would be best is to hire a controller with a bookkeeper, or maybe a fractional controller with a fractional bookkeeper, or one fractional and the other full-time. The point is, as you get more senior with your role, you don't want to have that person in the weeds doing the work. Instead, you want them higher directing someone who's less experienced and because of that more, cost-effective.
Another role that I see common for a startup to hire as one of their first accounting and finance hires is a VP of finance. Just like a controller, you don't want to hire just a VP of finance because you don't want this person doing the menial work. A VP of finance working with a Senior Accountant, I would say is actually my favorite combination, because you have someone who's fairly familiar with the accounting side of things without being so expensive, while you have a VP of finance who is able to nicely report to your board on what exactly is going to take place in the future, bridging the gap between FP&A and accounting . This solution if effective, while also helping keep the cost low.
Let's revisit this org structure:
The ideal combination would be someone who overlaps with both departments in a senior role, overseeing someone in a more junior role, specializing in just one of those departments.
Now your startup may not have the budget to make two hires, and that's totally fine. You may not even want to go down the route of making a full-time hire and instead hire someone on a fractional level.
Maybe you want to hire a fractional bookkeeper with a fractional controller and a fractional CFO. In fact, that's the most common structure that I see Seed stage or Series A startups do.
The reason is that it's cost-effective, and at the same time, they get the support at every level that’s needed.
Josh Aharonoff CEO and Outsourced CFO
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