Platform companies still underuse their finance function

Development of the finance function

We see a major difference between platform companies that first began in an attic and those that have emerged from a corporate environment as a spin-off or carve-out. The first tends to have a small finance department with one or two all-round creative individuals, focused on accounting and financing models. They are often less aware of compliance and additional complex legal and regulatory requirements. If they grow too fast, these organisations are likely to reach their limits. This is because processes and reporting become more complicated or because they are expanding abroad, for example. Formalising processes and roles and segregating duties, or hiring in external expertise, can help if only to avoid compliance risks.

In the second category of companies, we often see that the new finance function is a small-scale version of the parent company's finance department: it's too big and too extensive. They underuse the opportunity to set up a lean & mean greenfield finance function. Out of a sense of security, they re-create a miniature version of the old finance department. In our experience, this is bound to create flexibility problems. Finance is perceived as cumbersome and limiting, operating inefficiently and ineffectively in spite of its size.

Culture reflected in finance function

As a CFO, how do you create an appropriate finance function? Platform companies innovate, disrupt, and redesign market propositions and industries. Their strength lies in identifying added value, eliminating unnecessary elements, and ensuring speed and flexibility. These are precisely the principles that the finance function also needs to adhere to. This is difficult, because the finance function tends to look for standardisation and universal procedures and rules, and trust will now have to be built in a different way.

Roles of the finance function

It's therefore worth distinguishing between the different roles of the finance function. Firstly, the bookkeeper - focused on accurate, complete and timely record-keeping. Its retrospective character, in particular, is a key pillar.

Secondly, a platform company's CFO has an important part to play as a 'business partner' to help the business grow; identify opportunities; and mitigate risks. It's about striking the right balance. You can compare it to a pit stop, where you make sure that all parts are available and in working order. You don't want  lumber to weigh down the business, but you do want to make sure everything is done safely. These are challenges that platform CFOs need to embrace. Within a platform company's data-driven environment, predictive analytics and data mining, for example, offer new opportunities. 

We also see a crucial role for the CFO in structuring and raising finance. This starts with analysing potential financing models, and their timing and feasibility. And then continuing to ensure that the right financial information is available, to give an accurate view of the company's performance. But above all, by looking ahead and being able to properly demonstrate its future potential.

Agile finance

In order to perform these roles effectively, the way of working also needs to be flexible. Here, agile principles can be applied with a focus on customer orientation. Short sprints will ensure frequent results and acceptance and integration of changing circumstances. In practice, this can be done by small teams. They can then tackle the key issues in structured sprints so as to create a cycle of continuous improvement.

Practical tips

• Align the company's strategy with Finance's vision 🡪 ’Give Finance a seat at the table’
• Create your very own 'Finance Super Team’ 🡪 Define the roles and the required capacity and tooling 
• Set up an agile Finance organisation 🡪 Design processes rather than deadlines. Constantly adjust expectations and needs
• Strike a balance 🡪 Make sure there is a proper balance between ambition and compliance, between record-keeping and forecasting, and between being innovative and conventional.