The finance function at a 10-person startup should look nothing like the finance function at a 100-person company. This sounds obvious, but most founders either over-engineer it early (hiring a full-time CFO before they need one, building a finance team before the processes exist to justify it) or under-invest in it dangerously late (running critical financial operations on spreadsheets and goodwill until something breaks).
Getting the sequencing right — the right roles, at the right time, in the right structure — is one of the most consequential organisational decisions a founding team makes. This guide provides a stage-by-stage framework for building a finance function that serves the business without overbuilding it.
The finance function: four distinct layers
Before discussing who to hire and when, it's useful to understand that the finance function has four distinct layers, each requiring different skills and delivering different value.
Layer 1: Bookkeeping and transaction processing Recording financial transactions, processing payroll, managing accounts payable and receivable, bank reconciliations. This is operational finance — it needs to happen accurately and on time, but it is not where strategic value is created.
Layer 2: Accounting and compliance Producing statutory accounts, managing tax obligations, ensuring compliance with local regulatory requirements (VAT, corporate tax, employment taxes). This work requires qualified accounting professionals and is typically the layer where external advisors (accountants, auditors) contribute alongside internal resources.
Layer 3: Management reporting and control Month-end close, management accounts, variance analysis, and financial controls. This is the layer that connects historical financial data to the business's operating performance. It requires a financial controller or equivalent.
Layer 4: FP&A and strategic finance Financial planning and analysis, forecasting, capital allocation, investor relations, and strategic financial input. This is the layer where a CFO or fractional CFO operates.
The common mistake is conflating these layers or trying to hire a single person to cover all of them. A bookkeeper is not a controller. A controller is not a CFO. Hiring a CFO and expecting them to process payroll is a misallocation of expensive talent. Hiring a bookkeeper and expecting strategic finance insight is a recipe for flying blind.
Stage 1: Pre-seed to seed (0 to €500K ARR or equivalent)
Finance team: Bookkeeper (part-time) + external accountant + founder
At this stage, the finance function is lean by design. The core requirements are: transactions recorded accurately, statutory obligations met, and the founder having enough visibility to manage burn and make basic financial decisions.
What you actually need:
- A part-time bookkeeper (10–15 hours per month) using Xero, QuickBooks, or Sage to maintain clean books and process transactions
- An external accountant for statutory accounts, tax returns, and compliance
- The founder managing the financial model and key financial decisions directly — there is no substitute for founder-level understanding of the numbers at this stage
What you don't need yet:
- A full-time finance hire of any kind
- Dedicated FP&A software
- A fractional CFO (unless you've raised institutional capital with reporting obligations, in which case a light fractional engagement may make sense)
The most common mistake at this stage: Spending time on financial infrastructure that doesn't match the complexity of the business. A 3-statement model with working capital schedules is overkill for a pre-revenue company. A well-maintained cashflow forecast and a simple P&L tracker is not.
Stage 2: Seed to Series A (€500K to €3M ARR)
Finance team: Bookkeeper or junior finance manager + fractional CFO
This is the stage where the finance function starts to genuinely matter — and where most startups get the structure wrong. The typical failure mode: hiring a full-time "Head of Finance" who is junior enough to be affordable but experienced enough to give the impression of having financial leadership. In practice, these hires are often controllers or experienced bookkeepers, not strategic finance leads.
The better model: a part-time bookkeeper or junior finance manager handling the operational layer, supported by a fractional CFO providing the strategic layer. This gives the company access to genuinely experienced financial thinking at a cost that is realistic for the stage.
What you need at this stage:
- Month-end close producing management accounts within 10 working days of month-end
- A financial model maintained monthly (the fractional CFO owns this)
- Rolling cash flow forecast updated monthly
- Board and investor reporting (typically quarterly)
- Basic financial controls: approval thresholds, expense policies, bank signatories
Key hires to consider:
- A finance manager (mid-level, not executive-level) to own the operational layer — bookkeeping, reconciliations, accounts payable/receivable, payroll coordination and, once the sales team grows, the monthly commission run
- A fractional CFO (1–2 days per week) to own strategy, modelling, investor relations, and anything forward-looking
Total finance cost at this stage: €3,000–€8,000/month for the fractional CFO plus €3,000–€5,000/month for a part-time or full-time finance manager. Roughly €72,000–€156,000/year total — a fraction of the cost of two full-time experienced hires.
Stage 3: Series A (€3M to €10M ARR)
Finance team: Finance manager or controller + fractional or full-time CFO (depending on complexity)
By Series A, the finance function needs to be running reliably and producing institutional-quality output. Board packs need to be board-quality. The financial model needs to be a live management tool. Investor reporting needs to meet the standards of institutional investors who sit on multiple boards and have benchmarks.
What changes at this stage:
- Monthly close discipline becomes non-negotiable — investors will ask if management accounts aren't available within 10 days of month-end
- Unit economics need to be tracked and presented at a level of sophistication appropriate for Series A investors
- The CFO (whether fractional or full-time) needs to be able to represent the business in investor meetings independently of the CEO
When to move from fractional to full-time CFO:
- The fractional CFO is consistently working more than 3 days per week
- You're raising Series B or planning to in the next 12–18 months
- The business has multi-entity or multi-geography complexity that requires dedicated finance leadership
- The board is requesting a full-time CFO as a condition of their continued support
The critical hiring mistake at Series A: Promoting a good finance manager into the CFO role before they're ready. The finance manager and the CFO are different jobs. The skills that make someone excellent at running month-end close, reconciling accounts, and maintaining financial controls are not the same skills required for investor relations, capital allocation decisions, and strategic financial leadership. Conflating the roles leads to underpaying someone for CFO work or paying CFO rates for finance manager work — and often leaves a gap in one layer or the other.
Stage 4: Series B and beyond (€10M+ ARR)
Finance team: Full-time CFO + Financial Controller + FP&A analyst/manager + (as scale demands) specialist finance roles
At Series B and beyond, the finance function becomes a full department. The CFO is a C-suite executive responsible for capital markets, investor relations, M&A, and overall financial strategy. The controller runs the accounting and compliance function. A dedicated FP&A resource (analyst through manager) handles the modelling, forecasting, and analytical work.
Additional specialist roles that typically appear at this stage:
- Treasury manager: Managing cash, banking relationships, and foreign exchange if the business operates in multiple currencies
- Tax manager: Particularly relevant for businesses with multi-jurisdictional operations
- Financial systems manager: As the tech stack grows more complex (ERP implementation, FP&A platform, reporting tools), dedicated expertise to manage it becomes necessary. Our review of AI tools for finance teams covers what is worth adopting.
The fractional model as a permanent structure
One important point worth making explicitly: the fractional CFO model is not just a transitional structure. For many SMBs that are not on a venture-backed growth trajectory, the fractional model — a part-time experienced finance leader supplementing a lean internal team — is the right permanent structure.
A €5M revenue professional services firm does not need a full-time CFO who costs €200,000 per year. It needs excellent financial visibility, solid management reporting, and strategic finance input on key decisions. A fractional CFO at 2 days per week plus a strong controller provides all of that at approximately half the cost.
The trigger for moving to a full-time model is genuine full-time workload at the CFO level — which for most businesses only arrives at significant scale, significant complexity, or both.
FAQs
Should I hire a CFO or a VP Finance? These titles are used inconsistently across companies. The key question is about the scope and scope of the role. A CFO is typically a board-level or board-facing executive responsible for overall financial strategy and investor relations. A VP Finance is typically focused on the internal financial function — reporting, controls, and FP&A — without the external-facing investor relations component. At earlier stages, both roles are often combined.
What qualifications should I look for in a finance manager? For the operational finance layer, a qualified or part-qualified accountant (ACA, ACCA, CIMA, or equivalent) with relevant industry experience is the standard. Don't hire a finance manager who hasn't worked in businesses at a similar stage to yours — the skill set required to work in a fast-moving, system-light early-stage company is genuinely different from a well-resourced corporate.
How do I manage the handoff when transitioning from fractional to full-time CFO? The fractional CFO should play an active role in the recruitment process — providing input on the brief, participating in interviews, and ideally overlapping with the incoming full-time CFO for 4–8 weeks to ensure a clean handover of models, processes, and institutional knowledge.
BB Financial Services Kft provides fractional CFO services to startups and SMBs at the stage where strategic financial leadership matters most but a full-time hire doesn't yet make sense. Get in touch to understand what the right finance structure looks like for your business.