Cash Management, Process Identification and Hiring, Become the Top Priorities Over Automation for Finance and Accounting Leaders in Early Stage Businesses.
Carpe Diem Managing Partner, Fay Wasylyniuk, presented these questions to leaders in companies comprised, almost entirely, of life sciences or biotech businesses. The majority of leaders cited cash management as the most important accounting priority at start-up. Leaders also focused on the importance of ensuring that payroll, accounts payable, accounts receivable, and bank accounts are set up in accordance with laws and accurately reported.
– for management decision-making and stakeholder reporting. Other responses also highlighted that hiring the right people for the team was necessary for establishing proper internal controls and segregation of duties.
Leader responses were consistent that there was a need to have a balance between human involvement and automation in a finance function. The majority indicated that for a start-up,100% of the work should be manual with a shift to automation once end-to-end processes were defined. Transaction data could be automated once repeatable patterns were identified understanding that there would still need to be human intervention for areas involving judgment and strategy. Responses differed between 25% and 70% automation as the company grows. We expand on the details of these findings in the sections below.
Important Accounting Priorities Upon Start-up
Among the leaders surveyed, all mentioned in some way the importance of setting up finance controls including the establishment of cash management, getting books in order for accounting processes, streamlining programs, including preparing for an audit, and hiring the right people to ensure these processes are followed through effectively. One leader said it is important to “determine the most critical reporting tasks – are there regulatory requirements or necessary reporting to lenders?” The majority of leaders surveyed referenced the significance of keeping track of cash and having proper procedures when dealing with that cash, including “visibility to executive leadership on where the money is going and what’s coming in.”
Many others cited the need for proper internal controls with one saying that leaders should “make sure they have the right people with high standards who will do the right thing. You don’t necessarily have a reviewer at the beginning, so it’s critical to have the right people.” After setting up processes and procedures, reviewing policies, and setting up payroll and bank accounts, one leader said the next step is to “understand the business strategy and what key activities need to happen e.g. research, commercialization, then gear the function to support those activities, while keeping the big picture in mind beyond 6 months.” Another leader mentioned this step as well saying that after establishing a strong operational base, it is time for an “assessment – how do the processes look? What needs to change?”
Determining the Right Balance between Human Involvement and Automation as it Pertains to Accounting Labor for a Startup
All leaders agreed that in the beginning, a startup has “a lot of manual controls and human input” until proper growth and revenue are acquired. Most also agreed that there is a balance, and that human involvement cannot be eliminated. When considering where automation can help aid in processes, leaders said “anything that needs to be done routinely, multiple times can be automated. Anything that involves judgement, strategy, and advice [requires] the right skill set.” Other leaders expanded upon this sentiment saying that “automation is important for data entry, but reviewing should be done manually,” while another stated the desire for “automation around invoicing and wanting the team to think and review more than manually enter invoices.”
Conclusions
While all leaders mentioned that automation can be useful, none believed it could completely eliminate the need for human involvement. The consensus is that automation can be a tool to speed up otherwise repetitive and lengthy processes, freeing up time for leaders to focus on analyzing and strategizing. One leader said, “Technology is an absolute, but it is only as smart as the people building and maintaining [it].” Once an accounting startup has prioritized the procedures, routines, policies, and accounts, automation can be beneficial in invoice data entry, equity transactions, paying bills online, going paperless, etc., but manual checks and balances should still be an integral part of the success of the startup.
These market insights from Carpe Diem Global Partners are gathered from the firm’s extensive client work leading Board, CEO, CXO, and CHRO executive search engagements for public and private multinational companies. For deeper, custom insights, contact Fay Wasylyniuk at fWasylyniuk@carpediempartners.com