Perhaps the main issue for start-ups when it comes to business survival is scaling. At a certain point, many organisations plateau and it’s only with the right leadership and mindset that a company can take that next step, achieving growth rather than folding in on themselves.
The Small Business Administration reported in 2021 that 20% of start-ups fail in their first year and 50% within their first five. Add issues such as inflation, supply chain disruption, and ongoing staffing challenges, and it seems the picture is barely likely to look much rosier any time soon.
In the opinion of Darren Cran, COO of accounting software specialists AccountsIQ, the key for any start-up that wants to scale doesn’t come through completely overhauling or replacing the systems that have got you to this point, but in enabling smart integration and gradual change: identifying the right platform or service which facilitates and paces growth as and when your business is ready for it.
“When you’re prospecting, generating demand and account information, selling to customers, creating contracts, billing, production; those things all interact with your finance system,” Cran says. “In a perfect world, all businesses would have the right systems with the right types of adaptability from the beginning; something that scales as your business grows. But what’s important is finding the technology that is specific to you. Something which can bring your legacy systems up to date, rather than scrapping them completely.”
From Start-up to Scale-up. How to Find the Right Finance System for GrowthBy AccountsIQ
In some ways, Cran says, AccountsIQ developed as a platform to fill this niche; paving the way for smaller businesses to make the adoption of digitalisation as easy as possible, while also providing something versatile enough for established enterprises to integrate into their current systems. The key, he says, is for businesses to seek out a platform that isn’t too basic in terms of its functionality, but which also doesn’t overwhelm with complexity.
“A lot of businesses tend to start with a product that is like QuickBooks or Xero,” he says. “And they put off the migration to a scalable platform like AccountsIQ because of cost or short-term thinking. And while it’s true that at the start of your business journey, you don’t need any bells and whistles apart from a standard digital bank and MTD connection, as well as some baseline ability to carry out compliance, pretty soon those capabilities are going to need to diversify and those initial platforms just aren’t going to cut the mustard.
“So what AccountsIQ do in the first instance is to connect your entire financial system across your whole business to your bank, making everything tax compliant. Those are standard out-of-the-box integrations, and then the scalability comes when customers use our platform for add-on integrations, collaboration capability, and garnering insights through BI reporting.
“We’ve also got a service component, which your basic platforms don’t have. A dedicated support team who deal with account management and adoption, meaning that if your business is ready to make that next step, you’re not just completely on your own. You can talk to us about what your needs are next.”
The flip side of this, of course, is having too much complexity. Using the example of Salesforce, Cran stresses that while it’s an ‘exceptionally good product’, it also amounts to something of a blank canvas. Without customers having the wherewithal – or even the need – to use it to its full potential, it can sometimes come at the expense of doing business efficiently.
“It’s a bit like using a Formula 1 car to take you into work every morning,” he says.“It doesn’t provide anything on the service side, so you’re essentially at the mercy of external consultancy, which charges you by the day for their expertise. Nor are the more complex ERPs or expert consultants necessarily going to understand your business.
“When a customer comes to onboard with a team like ours, we really take the time to learn each business’s nuances, and achieve outcomes which are best for you.”
What investors need to consider
Of course, when start-ups are trying to scale, the other part of the equation comes on the investment side. Successfully securing VC funding can be the difference between life and death for a nascent business, but, according to Cran, taking a short-term view to securing capital (and in turn, finding oneself in partnership with financiers more focused on fast returns) can be incredibly risky. Rather, start-ups need to be able to make strong business cases for longer-term investment.
“Investors are interested in business from the perspective of growth and return on investment,” Cran says. “And the most accurate and easy way to get an indication of how businesses are doing is to see if their business plans match up accurately with financial projections.
“But this can be a Catch-22 for businesses since growth often depends on being able to secure seed money in the first place. VCs need to feel confident that the startups they invest in will have the right people doing the right things. So a case can always be made to put effective systems in place, especially when it comes to finance, which is the number one system to be invested in because finance touches virtually every part of a given business.”
Before seeking funding, therefore, businesses need to think about and analyse their pain points. Typically, these can range from how to integrate legacy products, to transitioning data into the cloud, lack of future-proofing, and securing the initial costs associated with finding the right staff.
“That’s why a lot of start-ups will turn to a QuickBooks, because it’s all they can afford at that stage in their scaling journey,” Cran says. “But those products just can’t take the transaction volumes as time goes on, and VCs will be able to spot that pretty quickly. Not only is this inefficient, but businesses in some cases can lose access to older transactions as a result of being on the wrong platform. Which causes its own issues when it comes to regulation, auditing and compliance.
“For businesses seeking to scale internationally, their platforms need to have good FX capability, be able to conduct analytics, automate legacy processes through a single pane of truth, and build in collaboration efficiency. Providing automation reduces manual entry, provides real-time results for people, and reduces the amount of time that employees are caught up in inefficient manual processes.”
What successful scaling looks like
According to Cran, an AccountsIQ client experienced growth in the last year of 110%, and said that they simply couldn’t have done it without employing automation to reduce manual processes and speed up reporting in their finance function.
“The project created a cultural change within the business,” Cran says. “There was a perceptual change in employee mindset, and we were told by the CFO that it was down to our product being shared with as many people as the business deemed necessary.
“Something as simple as that democratises what would’ve been a laborious manual process and allows employees to focus on quality work. It takes away a very big barrier, and suddenly businesses find that growth happens faster than it ever would have before.”