From Startup to Success: Mastering Business Controls for Growth

| FINANCE PROCESSES

In the wake of a number of high-profile startup frauds, it’s high time to dispel the myth that business controls impede growth. While excessive or poorly implemented checks and balances can hold back a rapidly scaling company, it is possible to design a progressive control framework that empowers a growing company to achieve the seemingly contradictory objectives of risk management and agility.

We’ve seen what happens when controls go out the window—just look at FTX. When former Enron recovery chair John Ray III took control of FTX following CEO Sam Bankman-Fried’s arrest, he described the company’s corporate controls as a “complete failure,” citing inadequate governance, irresponsible cash management processes, and the concentration of authority within a small, inexperienced group of decision-makers, among other issues.

As a KPMG-qualified auditor with 17 years of experience working in senior finance roles at large enterprises and fast-growing venture-backed startups, I am always surprised at how common lax controls are among smaller businesses and early-stage startups feeling pressure to scale quickly. Unfortunately, these companies are particularly susceptible to avoidable losses due to poorly designed or implemented controls.

There are opportunity costs to lax controls too: The cost of capital has jumped sharply following record interest rate increases, making fundraising considerably more difficult. That increase also makes investors much more cautious, incentivizing them to perform more rigorous due diligence than ever before. I recently assisted an early-stage company with a Series A funding round, and found that the breadth and depth of the diligence was stronger than any other process I had experienced before. For example, the investor asked about the payment release strategy and wanted to know what approval levels the company had in place within the payment processing solution. In the past, this level of detail was uncommon at this investment stage.

In this article, I show you how embracing a thoughtfully designed progressive control system can support your company’s success, both by minimizing risk and reassuring investors.