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THE FIVE STAGES OF FINANCIAL MATURITY

Every week, I get the same questions in my inbox:

“We just hit $X what do we need next?”

“Should I hire a CFO?”

“Our books are fine, but I feel like I’m flying blind. What’s missing?”

They’re all variations of the same question: what’s next for my finance function?

And it’s a good question. Because too many business owners either build too soon and add layers of complexity before they’ve nailed the basics or wait too long, letting chaos and uncertainty force their next move.

The truth is, your financial system evolves in phases, just like your operations or your team.

Each stage demands a new way to think, plan, and measure.

You don’t need everything at once.

You just need to know where you are and what comes next.

Today, I’m going to break down the 5 stages of business finance and what it means for you.

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STAGE 1: THE FOUNDATION

Revenue: $0–$1M
​Profit: <$100K
​Annual Accounting Cost: $0-$30K
​Goal: Understand your machine before you hand it off.

In the early days, your job isn’t to hire a bookkeeper. It’s to get the business off it’s feet. To do that, you need to understand the business model:

What actually drives revenue?

Where does margin come from?

What costs scale and what don’t?

This is an exercise in experimentation. Some find “the answer” early, others take tons of iterations. It doesn’t mean one was right and other wrong. One may have better instincts or just gotten lucky.

At this phase, relying on a CPA or CFO to tell you what you need is a waste of time and stealing calories from what truly makes you successful.

But, you know what will steal those calories? Not knowing what’s working or not. The only way to address this is separating your books from your personal finances. This separation creates clarity, which allows you to actually focus on the business model as you need to.

So:

• Open a dedicated business bank account.
• Stop mixing personal and business expenses.
• Track cash in quickbooks and limit the number of accounts to revenue and a few key expenses.
• Pay your taxes on time.
• Create a habit of understanding your cash rhythms. This is as simple as a spreadsheet with recurring expenses or monitoring your bank account on a daily or weekly basis.

We’re trying to figure out what gets us to escape velocity in having a real business, but need to remove the barriers from reaching that understanding. So understand your machine (numbers), so you can hand it off properly when ready.

CHECKLIST:

• Open a bank account and establish your entity
• Start using an accounting software (like Quickbooks) to track revenue and expenses
• Create a personal ritual of regularly monitoring cash flow

STAGE 2: OPTIMIZATION

Revenue: $1–$5M
​Profit: $100–300K
​Annual Accounting Cost: $20k-$150k
​Goal: Visibility and control.

You’ve proven your model. Cash is coming in, and now you need structure.

This is where we bring in a bookkeeper. This can be internal or outsourced and they’ll handle day-to-day transactions, reconciliations, and reporting. You can maybe do this before $1M in revenue, depending on the business, complexity, and profits.

Once you bring them in, the first key is making sure you don’t overcomplicate things. Stay on cash-basis accounting for now; rhythm matters more than precision. You want WEEKLY transaction coding and monthly reconciliations. This makes sure you have your numbers quickly anytime you want them.

As the owner, you should be starting to learn how to see around corners:

• Build a napkin forecast: a simple 12-month sketch of expected sales and spend.
• Track a few KPIs on a spreadsheet: revenue growth, margin, cash balance.
• Meet monthly with the bookkeeper to review your P&L, bank accounts, and ask questions.
• In situations where you have limited finance knowledge or more complex business, hiring a Bookkeeper + Fractional CFO “access” package could be an option here.

Some fractional CFO businesses will hold office hours or group coaching where you get access and the ability to call with the expense of a more deep involvement. Know, though, that their knowledge on your specifics may be limited because they’re not an expert in you.

But please, don’t rely on the CPA doing your taxes for business advice. They’re great at taxes, But that doesn’t guarantee they’re good at strategy. Some may be, but you can’t assume all are.

Your business will evolve quickly here… new services, hires, pricing shifts. Optimization means keeping pace with that change without losing clarity.

CHECKLIST:

• Hire a bookkeeper
• Do a napkin forecast/plan
• Start tracking your key KPIs
• Monthly review your financials (one hour minimum)

Stage 3: Strategic

Revenue: $5–$15M
​Profit: $300–750K
​Annual Accounting Cost: $100k-$450k
​Goal: Align plans, cash, and strategy.

The complexity is now real and the stakes are higher. You can’t just track; you have to plan.

This is where finance starts to become a leadership function.

You can keep accounting outsourced, or bring on a supervisor-level accounting lead to own the process. What matters is that someone is responsible for accuracy and timeliness.

Now it’s time to:

• Move to accrual accounting for a clearer picture of performance.
• Shorten your monthly close to within a week.
• Run quarterly planning cycles with key leaders (PlanningOS).
• Replace your napkin forecast with a full financial forecast that shows revenue, expenses, and cash flow.
• Engage a Fractional CFO to lead forecasting, scenario planning, and capital allocation (CapitalOS).
• Review KPIs weekly, not just monthly.

At this stage, you’re turning reports into decisions. Finance shouldn’t be sitting on the sideline, but actively involved in making the business better at what they do through providing clear and timely data.

If they’re unable to achieve that, you as the business owner need to make it a priority. Bad or slow data at this stage likely means the business is having to pause decisions for the data or make decisions with bad or incomplete data. In a $15M revenue business, one bad decision can cost 100s of thousands of dollars.

CHECKLIST:

• Implement quarterly planning sessions with business leaders
• Transition to accrual accounting and establish a close schedule for the Accounting/bookkeeping team
• Engage a Fractional CFO to help transition to develop a more full KPI tracking system, and professionalize forecasting

STAGE 4: SCALABLE

Revenue: $15–$50M
​Profit: $750K–$3M
​Annual Accounting Cost: $300k-$1.2M
​Goal: Predictability, clarity, and forward control.

You’re running a mature operation now. Finance must move from support to strategy.

Hire a Controller to manage the day-to-day of the monthly close, reconciliations, systems, and internal controls. Your CFO (fractional or full-time) becomes your strategic and forecasting partner. You’ll likely start this cycle with a fractional CFO and end it with a full-time CFO, though AI has pushed the need to hire a CFO “up the revenue chain” and we could see businesses sticking with Fractional CFOs much longer.

Here’s what shifts:

• Forecasting becomes rolling (12–18 months ahead) and reviewed monthly.
• Budgets and KPIs are tracked at the department level, not just company-wide.
• Reporting is standardized and as “live” as possible so every leader knows their numbers.
• Software and systems get more formalized, often transitioning to more “enterprise” solutions.
• Risk management becomes a regular conversation (insurance, debt covenants, contingencies).

This is the stage where you start having a real “finance department” and clearer finance roles. The complexity of the business will determine how filled out this is, but you can generally expect to see a Controller, Senior Accountants, and clerks (AP, AR) with specific and narrow roles.

This isn’t a hard and fast rule, as I’ve seen businesses over $50M with only 1-2 accounting staff, but that’s more the exception than the rule.

CHECKLIST:

• Formalize your accounting department structure
• Setup department level budgets
• Explore enterprise grade software to better serve your scaling needs

STAGE 5: CAPITAL ALLOCATOR

Revenue: $50–$100M+
​Profit: $3–10M+
​Annual Accounting Cost: $800k+
​Goal: Optimize return, resilience, and optionality.

At this stage, you’re no longer just running a business, you’re managing capital. Profits are such that there are constant decisions about what you do with your money.

It’s in this stage that finance evolves from teaming in strategy and reporting results to deploying resources:

• Full team: CFO, Controller, FP&A, Treasury.
• Long-term (12–36 month) capital and cash planning.
• Strategic use of debt and equity.
• Return-on-capital tracking replaces simple profit metrics.
• Scenario and stress testing built into planning.
• Finance partners directly with operations, marketing, and leadership.

For each business, this can look vastly different, but this often starts the phase of external investment and changing business goals. Some companies are happy here and you’ll see the business owner start to build things outside the company. Others you’ll see really “professionalize” and start looking for ways to become a leader in their industry and others.

No matter which route you choose, this is where you’ll likely want to consider who you partner with for banking, insurance, lawyers, and CPAs. Do they have experience with companies your size or could you be better served moving “up market?”

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Revenue is a great proxy for complexity, but it isn’t the only thing. Transaction volume, inventory management, cost accounting, and project or job-related tracking also determine where exactly these stages fall for you.

Every new business line, customer, vendor, etc adds complexity.

Your systems and cadence must mature before chaos does.

As you scale, your financial complexity compounds faster than your revenue.

Each stage demands a new operating system, not just new people. This means better systems, cadence, and clarity.

You’ll find yourself in a world of pain if you just assume “we’ll up our people count.”

If you’re unsure where to go next, I’d love to talk. We help businesses navigate these decisions regularly, so we can pull from our experience and help you see the roadmap in your business.

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