How to structure a modern finance department

Just like snowflakes, no two finance teams are exactly alike. Depending on a myriad of factors, such as company size, industry, stage, business model, budget, and available talent, there are endless options for building a successful finance team. 

If you’re in the building phase, you might be at a loss as to where to devote your energy and how to allocate your resources. 

It’s worth putting in the effort to thoughtfully construct a team that best suits your company. After all, a well-rounded finance department will help the business reach its goals more efficiently and also help guide long-term company strategy. 

We’ll deep dive into the different options for structuring your finance department, and how to choose the right structure for your business.

Traditional finance department structure vs. modern structure

We need to quickly cover what so-called “traditional” finance departments look like versus a more “modern” finance department structure.

A “traditional” finance department will be siloed, with each team member staying in their respective lane. There will be a strict hierarchy, and very little overlap. 

A more “modern” approach to the finance department might be more fluid. Think shared services, cross-functional teams, and a flatter hierarchical structure. 

We can’t tell you which format is better for your company and your team. But we can give you insight into the finance roles and the questions you need to ask in order to build the best finance department for you.

Typical finance team roles

Before we dive into building your team, we’ll first need to cover the possible finance roles or functions that you may need. As previously mentioned, every finance department looks different. Some will include Legal or even People/HR teams, while others will focus strictly on finance. Keep in mind that quite a few finance team roles can be outsourced – even the CFO position doesn’t have to be full time!

So here are the roles typically found in the finance department:

CFO or leadership function

The Chief Financial Officer is the captain of the ship, and the highest-ranking member of the finance department. Some companies opt for a VP of Finance or Finance Director instead. For the purposes of this article, we’ll stick with the title of CFO, although if the top finance person at the company has another title, their duties will presumably be similar. 

Note that the larger the company grows, the more defined these leadership roles become. If there’s a CFO and a Finance Director, for example, the CFO usually handles external duties while the Finance Director focuses on internal matters, such as managing the finance department. 

Depending on the size of the company, the CFO could be incredibly hands-on in day-to-day finance operations (especially if the finance department is tiny or they’re the only member). Or, the CFO might only be involved in high-level strategic decisions or general management duties. The range in between these two extremes is vast!

In any case, the following usually falls under the CFO’s scope:

• The company’s overall finance strategy

• Managing the company’s investment portfolio

• Investor relations

• Broad strategies to increase profits and reduce losses

• Risk mitigation and management

Treasury

Treasury professionals manage company money and financial risks. The treasury manager oversees:

• Cash flow

• Revenue

• The company’s overall finances

• Compliance and risk

• Relationships with financial institutions

For very young companies, many of these concerns aren’t concerns at all. If you have little cash flow and few customers, there’s also little risk to manage. 

But in cash-intensive industries or for companies with a short runway, good treasury management is hugely helpful. Same goes if you have complex compliance and risk issues to deal with.

FP&A

Financial Planning and Analysis professionals are in high demand these days. Companies are increasingly focusing on financial strategy, plus detailed data analysis to help weather any future economic storms. These FP&A roles are therefore becoming more common.  

FP&A managers’ duties include:

• Budgeting and forecasting

• Strategic financial planning

• Risk management

• Business partnering

That final point is what separates the best FP&A teams from the pack. The ability to bake financial data into wider company decision making - to make other teams more efficient and effective - is rare and precious.

Accounts payable and receivable

Some companies choose to have dedicated team members handle accounts payable and accounts receivable duties. This is necessary if your company works with many vendors, suppliers, or customers, or where your billing and payments processes require lots of human intervention. 

AP and AR professionals handle incoming and outgoing invoices, payments, and payment reminders, among other responsibilities.

In many cases, these processes can be automated successfully. Good accounts payable software, for example, keeps track of your outstanding payments and ensures your teams pay suppliers on time. Some businesses don’t need a dedicated AP team as a result. 

Whether or not you choose to install AP/AR professionals depends on the complexity of your billing and payments cycles. You certainly can’t afford not to get paid on time, and these teams ensure that happens. 

Accounting and bookkeeping

Accounting is the backbone of any finance team. Accountants and bookkeepers have hands-on access to incoming and outgoing funds, and are responsible for the company’s holy grail: the balance sheet.

Whether you choose to keep accountants in-house or outsource to an external accounting firm is up to you. If your accounting is pretty simple – not too many transactions, or very consistent billing – then outsourcing will be fine for a long time.

Once your accounting gets more complex (multi-currencies, different product lines with variable prices, more suppliers) you’ll want a person or team in house. 

Financial Controlling

The Financial Controller is the finance department’s chief accountant. They oversee all the accounting operations. Not every finance team has one, but you'll need a controller once the company -- and the finance team -- starts to grow.

Payroll

Your payroll manager will, clearly, handle all things payroll. They’re responsible for ensuring that employees are paid correctly and on time. Payroll sometimes falls under the scope of the HR team or is handled by your accountant.

Similar to accounting, payroll can be managed in-house or it can be outsourced. When the company is small, you probably won’t have a dedicated payroll department or employee. One person may wear multiple hats, and payroll will be one of them.

Tax 

Tax professionals aren’t a mandatory part of the finance team, but leaders will eventually need to have someone knowledgeable about tax either in-house or outsourced. 

Why? Well for starters, every business has tax considerations to manage. Whether it's VAT, taxes on income, payroll taxes, or other tax issues, you’ll need a tax expert. And the larger your company grows, the more tax you’ll have to deal with. Especially if you operate within multiple countries, you rely on tax incentives as a revenue source, or your business requires lots of R&D.  

So which roles do you need on your finance team? The next section will cover what to take into account when structuring your team.

Choosing the right finance department structure for your company

We sound like a broken record by this point. But truly, there’s no one-size-fits-all approach to building a finance department. 

There are a few non-negotiable responsibilities that the finance team handles no matter what: basic accounting, tax compliance, budgeting, and reporting.

But beyond the basics, you’ll need to consider all the following factors when choosing the right structure for your company’s finance team:

Business model

A B2B company, a retailer, and a manufacturer all have different business models. This means that they have different ways of making money, creating revenue, and providing their service or product. It also means that they have vastly different needs for their finances.

The billing cycle is a key consideration here. If you expect annual recurring payments with relative consistency (and minimal churn), you don’t need a huge accounts receivable team. And your FP&A needs may also be limited, since modelling future revenue is fairly simple. 

If you rely on a high volume of consumer payments, you may need FP&A teams that can understand seasonality and react quickly to consumer demand. The faster they can inform your product and go-to-market teams about a change in the supply chain or consumer demand, the better. 

Industry

Along with your company’s business model, your particular industry may dictate how your finance team is structured. 

For example, if you work for a software company, the finance team won’t have to worry about things like inventory, the supply chain, physical stores, or leasing equipment. In that way, their accounting would be simple. However, SaaS companies usually have a strong FP&A function within their finance department to help forecast due to a rapidly evolving market.

On the other hand, finance teams in the construction industry have to manage vendors, employees, track invoices, and keep an eye on fluctuating costs of materials. In other words, there’s a heavy emphasis on maintaining positive cash flow. So their best bet is to make sure the accounting, treasury, and accounts receivable branches of the team are solid. They won’t need as much of an emphasis on FP&A at the beginning, for example.

Company stage

Just starting out? You probably won’t need an entire finance department – no shocker there. But you will need someone who can manage payroll, basic accounting (unless you outsource), tax and compliance, and invoicing. 

Established enterprise business? You’ll most likely need a large finance department to handle internal and external matters – you might even need to place team members in every region if your business operates in multiple markets. 

Other factors to take into consideration:

• How much do you want to automate your finance processes?

• Can one person perform several roles?

• How much can/should you outsource finance processes?

• Do you need a specialist in each core function?

• How heavily do you rely on tools? Which ones are essential to your tech stack?

• Does your company plan to grow? How soon and how big?

It may not be entirely apparent at first which roles you’ll need on your finance team. Leave room for growth and adjust accordingly along the way. 

If you build it, they will come

Having a finance team structure that aligns with the company’s structure and is suited to the organization’s size, industry, and stage is the ultimate goal.

Building the perfect finance team will take time and a considerable amount of reflection, but the payoff will be worth it. Once you’ve got a solid foundation, it will be easy to grow and scale the team alongside the business.

Top talent will be attracted to working within a well-structured department.