Most early-stage and high-growth companies don’t set out to build a weak finance function. It happens gradually, through a series of decisions that each made sense at the time. A bookkeeper gets hired because invoices need to go out. A spreadsheet model gets built because the board asked for a forecast. A tool gets purchased because the last one broke. Building a finance function from scratch this way, one urgent fix at a time, is how most companies end up with infrastructure that can’t support the business it has become.

The pattern is reactive by design. Founders are managing product, customers, and hiring, and finance often gets attention only when something goes wrong. By the time leadership realizes the infrastructure is inadequate, usually during a fundraise, an audit, or a board meeting where the numbers don’t hold up, fixing it costs far more than building it right the first time would have.

The Most Common Mistakes Companies Make

A few mistakes show up repeatedly in companies building a finance function from scratch.

The first is hiring a single generalist and expecting them to cover accounting, FP&A, and strategic finance at once. These are genuinely different skill sets. Accounting calls for precision and process discipline while FP&A calls for analytical judgment and the ability to translate numbers into decisions. Strategic finance on the other hand calls for investor and board fluency.

A strong generalist can often handle two of these well. However, very few people can do all three at the level a growing company needs, especially at the exact moment that need shows up.

The second is buying software before defining what the finance team actually needs to report. Tools get selected to solve today’s specific problem, not to support the reporting and forecasting the business will need in twelve months. This is how companies end up with three disconnected systems and no single source of truth.

The third is treating finance function design as a hiring decision instead of an operating model decision. Adding headcount without first deciding how close, reporting, and planning are supposed to work leaves even a fully staffed team executing an undefined process.

The fourth, and most costly, is waiting for an external event to force the rebuild. A CB Insights analysis of more than 400 VC-backed startups that shut down since 2023 found that running out of capital was the final, visible cause of failure in 70 percent of cases, but the deeper drivers were things like unsustainable unit economics and poor product-market fit.

A finance function that can’t produce reliable visibility into unit economics early doesn’t just create reporting headaches. It removes the warning system that would have caught the underlying problem sooner.

When to Actually Invest in Finance Infrastructure

There isn’t a universal revenue threshold that tells a company it’s time. The more reliable signals show up in behavior. If the close takes longer every quarter instead of getting faster, if forecasts are closer to guesses than models, or if board members are asking questions that take days to answer because the data isn’t organized to retrieve quickly, those are signs the function is behind where the business already is.

The same is true heading into a fundraise, an acquisition, or an audit. Investors and auditors expect financial statements, controls, and forecasts that hold up under scrutiny, and building that credibility under deadline pressure is far harder than building it in advance.

What a Well-Designed Finance Function Looks Like

A well-sequenced finance function builds the accounting foundation first. Clean books, documented processes, and real controls come before sophisticated forecasting, because planning built on unreliable data isn’t planning. Once that foundation is in place, the FP&A layer, budgeting, forecasting, and management reporting, can be added with confidence that the numbers underneath are accurate.

Just as important is keeping the orientations separate as the team grows. A controller function focused on accuracy and process is not the same as an FP&A function focused on business partnering and forward-looking analysis. Trying to compress both into one role past a certain size usually means one side gets neglected, and it’s often the forward-looking work that founders need most.

Building It Right the First Time

Companies formalizing a finance function for the first time are a common starting point for this kind of work, not the exception, per The Alliance Group’s Finance Advisory practice. Getting the sequencing and role design right early tends to save significant time and cost later, whether that means building out FP&A capability, strengthening the accounting foundation underneath it, or bringing in the right interim or permanent finance talent to execute the plan.

Key takeaway: Building a finance function from scratch works best when it’s designed as an operating model from day one, accounting discipline first, then FP&A, with clear role boundaries between them, rather than assembled reactively in response to whatever broke most recently.

Building or rebuilding a finance function? Let’s talk about what the right foundation looks like for where you are and where you’re going.