Building a Financial Backbone to Support Rapid Growth

For most lower-middle market, founder-led businesses, the finance and accounting function starts lean out of necessity but often remains underinvested as the company grows. Thus, this function struggles to keep up with the increasingly complex needs of a growing business. Information systems are patchworked together, financial data collection and quality are poor, cash flow forecasting and financial reporting lag operations, and ultimately, leadership lacks clear visibility into what is really happening.

The lack of transparency hinders a full understanding of the key drivers of business performance, thus impeding effective decision making, increasing uncertainty, and slowing growth. Also, without a strong financial backbone, access to institutional capital such as external financing from a bank or non-bank lender may inhibit necessary investment, again slowing growth. Investing in and building out a robust, integrated finance and accounting function from the start is critical. A solid foundation helps CEOs and CFOs lead with confidence, plan better, and drive growth.

 A core focus of NewSpring’s value creation process is working directly with CEOs and CFOs to build a high-performing finance and accounting function. This is an essential step in our platform builds. We have seen firsthand the significant benefits for companies that invest early in this function. Those companies are better able to measure performance, allocate capital more strategically, and move with greater agility to accelerate growth and drive superior outcomes.

Here are five critical components to establishing and scaling an effective finance and accounting function:

Laying the Groundwork: Assessing the Financial Foundation

Quality financial data is essential to every aspect of a business, from strategy to go-to-market to operations. As a result, it is critical to establish a process that captures data accurately, thereby creating an integrated, highly usable information flow. Doing so requires investing in talent, technology, and systems that facilitate this information flow. Companies should identify workflow gaps that may exist between GL accounting systems, reporting tools, and the organizational structure of the business. By understanding where there are deficiencies in operational workflows (such as financial data capture, systems integration, software/tools), companies can take the first steps to unlocking hidden insights and drive informed decision-making – helping CEOs refine strategy. 

From Data to Decisions: Turning Numbers into Strategy

Once the foundation is in place, business leaders can turn their attention to translating financial data into actionable insights. Accurate and timely financial data is extremely valuable to resource planning, business forecasting, and future pricing decisions, providing CEOs with a roadmap into their future performance. A strategic finance function is also essential to properly evaluating new investment opportunities, modeling potential acquisitions, and assessing integration costs or synergies. The right financial infrastructure enables better decisions, more accurate planning, and more successful M&A.

We have seen this transformation across our portfolio. Several companies have deployed business intelligence (BI) tools that pull data from disparate systems, including accounting, sales CRMs, and operations, to create real-time, actionable information accessible across the organization. This democratization of information not only enhances reporting, but it also empowers frontline teams making daily decisions that impact performance.

Scalable Finance for Growth & M&A

For all growing businesses, a strong finance function is a key building block for the business to grow both organically and through acquisition. Establishing repeatable processes that scale as the company grows is critical. Your finance function should be designed to support what your company will be, not only what it is today. Delaying this investment will only negatively impact an organization in today’s hyper competitive and fastmoving business environment. 

Given the importance of establishing a robust finance function, for all our lower-middle market platform builds, we view it as essential to get this on the right track immediately. We evaluate and source talent quickly and, if needed, will supplement external advisors to help assess and institutionalize systems and processes.

Identify Common Pitfalls and Practical Fixes

Finance isn’t a function you can set and forget. High-performing teams require regular self-assessments to address any talent gaps, outdated systems, siloed data, substandard reporting, and areas of limited visibility. When unaddressed, these areas are proven to impede performance and slow growth. However, it can be difficult to understand what you don’t know. First-time CEOs and CFOs may need to seek advice from advisors and experienced business builders on how to assess, build, and evolve the finance function as the organization grows. We work closely with our new CEOs and CFOs to help navigate through these early phases of the platform build to avoid pitfalls and provide solutions or access to additional resources.  

Why It All Starts with Finance

In the early stages of business building, it’s tempting to treat finance as something to figure out later, but delaying action only makes the path harder. Finance is more than accounting; it’s a key tool for strategy enablement, execution, and value creation. If you’re building a business to grow, this is where the groundwork begins. The companies that scale successfully invest early in building a strong financial foundation. One that accurately captures raw financial data and transforms it into a clear, digestible scorecard that provides the visibility needed to make faster, more effective decisions and helps leadership plan for what’s ahead.

A superior finance function does more than improve operations – it enhances the company’s value story, helping deliver better outcomes in a sale or capital raise. With the right systems and reporting in place, leadership can present the company clearly, demonstrate its sophistication, and move through an exit process more efficiently. We have observed this in our most recent exit, where the eventual buyer commended the company’s executives during diligence on the quality and comprehensiveness of the information and financial reporting. That foundation proved essential, not only allowing us to move swiftly through the process from LOI to definitive agreement in less than 60 days but also enabling the company to exit at a premium multiple.            

In summary, a sophisticated finance function is an essential cornerstone of a successful company. Getting this function on the right track early and investing in and building its capabilities properly are necessary to support a growing and thriving business.