5 Indicators that it’s Time for You to Hire Your First VP of Finance

Most small businesses start out using the services of bookkeeper to look after their accounting needs. And if a small business remains a small business, a good, qualified bookkeeper is all that company will ever need. However, small businesses often grow into larger businesses. At some point the business you may start to sense that your business has outgrown your bookkeeper and it’s time to hire a more sophisticated set of accounting skills.

The Five Factors

While it varies from industry to industry, there are usually five factors that lead business owners to decide that it’s time to hire a VP of Finance:

1. Size
   Bookkeeping simply records the business’ day to day operations and for small companies, that’s all that’s usually required. But companies experiencing growth also experience growing complexity in physical plant, inventories, service contracts, supplier and customer deliverables, capital expenditures and so on. All this activity needs to be recorded, controlled and coordinated and that usually means a VP of Finance.
2. Complexity
   A company with $10 million in sales may need a VP of Finance while the company across the street generating the exact same amount of revenue may be perfectly happy with their bookkeeper. The first company might have 10,000 transactions involving 2,000 SKUs while the company across the street sells 5 units a year for $2 million each. The complexity of the transactions can be a big factor in determining the need for a higher level of experience or knowledge.
3. Growth
   Rapid growth is another factor in deciding whether a company needs a VP of Finance. Any substantive growth and especially rapid growth benefits from automated systems to handle the growth. The company may also require appropriate financing to underwrite the growth. Having a qualified VP of Finance in place is especially important in this scenario to make the proper investments in technology and get access to additional capital.
4. Acquisitions
   Another big factor in the decision to hire a VP of Finance centres around anticipated acquisitions of other companies, lines of business or physical plants. A VP of Finance can put together the right team to evaluate the transaction and make a recommendation of the deal’s viability and impact on current and future operations. The VP of Finance is also able to prepare the information required by a potential lender or investor to fund the transaction.
5. Respect
   Last but not least, a qualified VP of Finance in place can be critical when respect is required by various stakeholders inside and outside of the company. Such stakeholders could include shareholders, suppliers, customers, bankers or regulators.

Maybe It’s Time

While there’s no hard and fast criteria around when it’s time to hire a VP of Finance, generally speaking, when an owner manager is not getting the timely and relevant information he or she needs to make proper decisions about their business, it’s time to make a change.