Accounting for Scale

Accounting For Scale

If you’ve read Scaling Up by Verne Harnish, you’ll know that the four key areas that drive growth in a business are;

• people
• strategy
• execution
• cash

In my experience, the area which is given the least attention by business owners is "cash", or the accounting function in general.

We’ve seen it over and over again in companies trading around the €1m mark.

The biggest problem is that there usually aren’t enough people in the finance function to support the cash-generating activities that lead to fast growth. 

John/Mary in accounts will not be able to perform the full duty of a CFO - setting and executing the financial strategies that deliver the growth goals of the business.

Here is what Verne says on the matter:

"If the #1 weakness of growth firms is marketing, the #2 problem is accounting. Accounting is often underappreciated. It is seen as a necessary evil to keep the [Revenue] at bay; invoice, collect, and pay bills; and provide monthly accounting statements – which often receive at most a cursory glance at the bottom line of the P&L.

Accounting is often underfunded as a result. Most entrepreneurs, if they have an extra dollar of profit to spend, invest in either making or selling stuff. Those are good uses of the money. However, we’ve seen profits and cash double within a year when business people also devote just a little more attention to the resources in accounting (remember, John D Rockefeller was an accountant by training). Hiring just one additional person to either support the CFO or carry some of this executive’s workload enables him or her to provide [what the business needs to scale]."

By getting the right people and processes into your accounting function, you’re actually driving growth in your business, not just supporting it.

The rewards for getting this right are significant!