Evolving Fiscal Culture As You Grow, Part One: Starting Strong
There’s no one way to define a strong fiscal culture, but it should align with your company’s values and overall culture.
Fiscal culture is your company’s approach to managing finances, but there’s no one way to define an effective one. It incorporates everything from how you finance your company and pay your employees to how you spend your budgets.
Some companies are known for their frugality, while others spend lavishly. Some executive and finance teams are highly disciplined, while others struggle to keep pace and hope for the best. Ideally, your company’s fiscal culture is created with intent, and fundamentally, it should align strongly with your company’s values and overall culture.
As we’ve prepared to launch our CenterCard program, we’ve talked to dozens of companies of all sizes about the business challenges they face. In this piece we’ve included a few quotes from our research to illustrate the experience of finance leaders of smaller companies, in their own words.
For startups and early-stage companies (up to 100 employees), the key success factors are, in essence, stable leadership, figuring out product/market fit, and not running out of money—monthly cash flow is critical. If you’ve taken on outside investment, you need to show that you are good stewards of the capital and demonstrate operational rigor.
Team structure and tools
Smaller businesses typically don’t have a full in-house finance department and may outsource accounting or other key functions. The CEO (or CFO) is often closely involved in day-to-day spending and approvals, and Excel is used heavily for tracking. Tools may extend to QuickBooks, bank applications, or mobile apps like Expensify.
Corporate card usage
At this size company, employees often use their own credit cards, the CEO’s personal card, or small business credit cards (with the CEO as personal guarantor) for business and travel expenses. A handful of cards may be distributed to growing sales teams or maybe a few people in marketing. Software subscriptions or other shared expenses are sometimes consolidated on one central card.
On growing pains:
“I’d love to get people off my personal card, but I don’t want to chase people down for receipts.”
CEO, smart lighting company
Challenges for start-ups and early stage finance teams
- Keeping data in static spreadsheets creates a serious lack of visibility. There’s no way to see recent transactions or communicate key financial information to teams and employees.
- As the team grows, it can be increasingly burdensome to carry large balances on personal cards (or on the CEO’s card). Employees may feel disempowered.
- Getting approved for corporate credit is difficult, especially for younger companies.
- Team members often spend too much time spend chasing down receipts, and expense reports can pile up.
- Policies may not be clearly articulated. Even if they exist, it’s difficult to enforce compliance before spending happens instead of after the fact. (Precisely why many early -stage execs prefer the “stick” of forcing employees to use personal cards with the threat of not being being reimbursed for out-of-policy spend.)
- Processes can get bogged down if the CEO or small finance team has too much on the plate. The system is difficult to scale.
On the limitations of pre-approvals:
“Even with a pre-approved budget, an employee could pay $500 for a dinner that should be only $100, and then there’s no recourse. It’s hard to get money back if something is spent that shouldn’t have been.”
CEO, customer data platform company
Suggestions for initial expense policies and programs
- Be sure you have key policies in place: travel policy, expense reimbursement policy, and approval workflows.
- Investigate other card options for spenders. Transition from having the CEO as personal guarantor to a corporate card.
- Look for creative ways, such as software and outsourcing, to offload operational tasks, such as reviewing every expense report for compliance
- Involve employees more in budgeting and forecasting while keeping the process as streamlined as possible.
- Focus on establishing a strong fiscal culture with the right balance between empowerment and controls.
- Keep the lines of communication open so employees understand the big picture and how their decisions impact the bottom line.
“I want people to be making decisions about spending. Seven out of ten times, I’ll totally agree. Three out of ten times we’ll disagree, and we’ll talk about it. Two of those times they’ll be right, and one time I’ll be right. I just don’t want to stop decisions from being made.”
CEO, smart lighting company
TO THE POINT:
It’s far easier to establish a strong fiscal culture from the get-go, with clear policies and open communication, than it is to rein things in when you’re feeling pressured about cash flow.