Working for a start-up
Start-ups need accountants just as much as established businesses do. Without efficient financial controls in place, new ventures can go out of business before delivering any returns to their investors.
Despite the potential pitfalls, it can be exciting for accountants venturing into the unknown of the start-up world. Here are few points to consider when working for new business ventures.
Rules and bureaucracy
One of the advantages of working in an established business is that all the relevant accounting and compliance policies should already be in place. Such structures may not exist in new ventures.
Although new ventures should not be too bureaucratic, a head of finance needs to create a matrix of policies gradually to serve the needs of a growing business.
Following an already established framework and drafting a new one from scratch are very different. It doesn’t mean that someone who feels uncomfortable with policy drafting should forget about joining start-ups, but it makes sense to consider how best to transition into a less disciplined or structured environment.
Take the example of accounting policy IFRS 15, Revenue from contracts with customers. The standard recommends following five steps: identify the contract(s) with a customer, identify the performance obligations in the contract, determine the transaction price, allocate the transaction price to each performance obligation, and recognise revenue when a performance obligation is satisfied.
In a new business, an accountant needs to be nothing short of a detective who feels comfortable investigating the unknowns involved in contracting with customers.
Accounting rules are only one set of a vast legislative framework with which businesses need to comply. As compliance attracts high costs in the form of legal advice, IT infrastructure and personnel, it is important that finance professionals plan well ahead.
General Data Protection Regulation (GDPR) is a case in point. Introduced in the European Union in May 2018, the legislation governs ‘the rules relating to the protection of natural persons with regard to the processing of personal data’. An accountant joining a new venture operating in the EU needs to understand if GDPR is applicable in their case, as non-compliance can attract high penalties.
It will also be much cheaper in the long run if internal reporting systems can produce information that regulators will be looking for in the future. Although a small business may not be required to comply with some legislation or supply certain information to the regulator at present, it is wise to plan for the future – especially when financial projections show a rapid growth and expansion of the business.
Implementing controls from the start has another advantage. There is a saying that ‘culture eats strategy for breakfast’, ascribed to a well-known management consultant Peter Drucker. No strategic plan can be delivered successfully unless employees build and maintain a culture that fosters responsibility and accountability. By ensuring that compliance is appropriately considered and budgeted for, accountants support the growth of companies where employees and management understand the broader implications of their work.
Network of administrators
Any new and growing organisation must also build a network of administrators who can collaborate and learn from each other about their work.
Accountants don’t necessarily need to understand the intricacies of coding, drafting legal agreements, compiling HR policies, recruiting, procurement, sales, supply chain or managing IT infrastructure. However, failing to understand how different parts of the business impact on the performance of the whole organisation creates blind spots that can be risky and costly when not managed properly.
Finance managers who work in budding organisations must be wary of complexity that prevents scrutiny and accountability.
The word ‘administrators’ used in this context is intentional. The meaning behind the word administrator is ‘to manage as a steward, control or regulate on behalf of others’. Considering the failures of some businesses, old and new, it is important to remember that business is run on behalf of the investors who hope to get some returns on their capital.
Accountants need to take time to observe how other colleagues approach their work. An obvious lack of respect about how the funds are managed may be an early warning sign that perhaps things will not go down too well in the long run.
Overall, working for growing organisations can be a great stepping stone in one’s career. By setting clear rules of engagement, paying attention to the regulatory environment and supporting the creation of an efficient administrative network, accountants can build healthy organisations that last well into the future.
Author: Urszula Pajdzik FCCA is a PhD candidate at Trinity Business School in Dublin
This article was first published in AB magazine March 2023