Manchester’s e-commerce sector is booming, with a surge in new entrants and expansion by established firms.

The region is benefiting from major growth and investment by an array of online consumer businesses based here, including high-profile brands such as AO.com, Zuto, Missguided, Boohoo, The Hut Group, On the Beach and Rentalcars.com.

Many have grown from small start-ups to become substantial and hugely-profitable international businesses in just a few years.

As they have flourished, so has the need to expand their crucial back office functions, notably in areas such as finance.

We’ve worked with many online consumer businesses and have noticed they tend to illustrate a pattern which is common in many rapidly-expanding companies.

Typically, entrepreneurial start-ups initially seek to minimise the costs of their finance function, employing a bookkeeper or accounts assistant to record transactions. Their primary focus is, quite rightly, on driving sales.

However, as turnover increases, they soon find that the pace of growth requires more financial control and management information. At this stage, a Management Accountant is often recruited.

Tipping point

As the business expands further, a tipping point often arises where the founder realises the need for additional investment in the finance function.

If the founder is well-advised, they will recruit a Financial Controller or Head of Finance with the skills to implement systems, controls and reporting disciplines that will support the current and planned scale of the business.

Sometimes there is a desire or intention for the Financial Controller to evolve into the Finance Director’s role over the next few years. However, in an extremely fast-growing business, this is often the wrong option.

The potential pace of expansion means that the experience of a seasoned FD will usually be required in addition to a solid Financial Controller.

This is especially true if the founder decides he or she wants to raise growth finance or take some cash off the table through Private Equity or other type of external investment.

Investing so much in the finance function is often completely against the natural thinking of many entrepreneurs, who see spending on ‘back office’ services as merely raising overheads with little benefit. Yet this is nearly always the wrong approach.

In a fast-growth environment, a lack of up-to-date, accurate insight into current and future performance and, crucially, cash flow management, can create business-critical problems very quickly.

The importance of a strong and well-resourced finance department in a fast-growth business environment cannot be overstated.

Tight financial control and informed business insight are vital ingredients for sustainable success. With those, entrepreneurs in any sector can plan how to stay ahead of the growth curve.