When to Hire FP&A vs Accounting Talent: A Practical Guide for Founders

When to Hire FP&A vs Accounting Talent

For most founders, the finance function evolves from a shoebox of receipts to a nagging spreadsheet, and finally, to a source of genuine operational friction. You know you need help, but the landscape of finance roles is confusing. Hiring an accountant feels safe, but they do not typically build the cash runway models investors demand. Hiring a financial planning and analysis (FP&A) specialist seems strategic, but they will not run payroll or close the books. This decision point, where you must choose between backward-looking compliance and forward-looking strategy, is a critical one. Making the wrong choice can lead to a wasted budget, critical gaps in reporting, and a painful re-hiring process down the line. To build a strong foundation, see our Building Your Finance Team hub.

Foundational Understanding: Accounting vs. FP&A

Before deciding who to hire, it is essential to understand the two distinct, and equally important, functions of a finance department. Misunderstanding this boundary is the primary cause of hiring mistakes in an early stage finance team. One role records history, while the other uses that history to write the future.

First, there is Accounting, which is best described as ‘Keeping Score’. This function is historical and compliance-driven. Its main purpose is to accurately record and report what has already happened in the business. It ensures the company meets its legal and financial obligations. For US companies, this is governed by US GAAP, while UK startups typically adhere to FRS 102. The output of the accounting function is a set of reliable financial statements that serve as the official record of performance.

Key accounting responsibilities include:

• Managing accounts payable (paying bills) and accounts receivable (collecting cash).
• Running payroll and managing related tax filings.
• Performing monthly bank reconciliations.
• Closing the books monthly, quarterly, and annually.
• Ensuring tax and regulatory compliance.

Second, there is Financial Planning & Analysis (FP&A), or ‘Planning the Next Play’. This function is forward-looking and strategy-driven. Its goal is to use the accurate data produced by accounting to make better decisions about the future. While accounting produces the "what," FP&A explains the "so what" and models the "what if." FP&A responsibilities center on translating historical data into strategic insights. The output of FP&A is decision support, not just a report.

Key FP&A responsibilities include:

• Creating and maintaining the company’s three-statement financial model and cash forecasts.
• Managing the annual budgeting process and re-forecasting throughout the year.
• Analyzing unit economics, such as customer acquisition cost (CAC), lifetime value (LTV), and cohort retention.
• Modeling different scenarios, like a new pricing launch, a major hiring push, or a delayed funding round.
• Preparing board decks and investor updates with variance analysis (budget vs. actual).

The Startup Finance Hiring Timeline

Your finance needs evolve directly with your company's stage. What works at pre-seed will break by Series A. Understanding this timeline helps you anticipate your hiring needs and build an effective finance team structure as you grow.

Stage 1: Pre-Seed to Early Seed (The Outsourced Era)

At this stage, the key question is: “How do I make sure my books are clean, payroll runs, and I am not doing it myself on nights and weekends?” The answer is almost never a full-time hire. Your transactional volume is low, and your primary need is compliance and basic bookkeeping. The reality for most pre-seed startups is more pragmatic: engage an outsourced accounting firm. The cost for outsourced accounting and bookkeeping for early-stage startups generally ranges from $500 to $2,500 per month. This service will handle your core accounting needs in QuickBooks (US) or Xero (UK), run payroll, and manage basic tax filings, freeing you up to focus on product and sales.

During this phase, setting up a proper chart of accounts is crucial. This is not just an administrative task; it is the blueprint for all future financial analysis. Consider a simple structure for an early-stage SaaS business:

• Revenue: Subscription Revenue, Services Revenue
• Cost of Goods Sold (COGS): Hosting Costs (e.g., AWS), Third-Party Software Fees, Customer Support Salaries
• Operating Expenses:
  • Sales & Marketing: Salaries, Advertising Spend, Commissions
  • Research & Development: Engineering Salaries, Contractor Fees
  • General & Administrative: Founder Salaries, Office Rent, Legal Fees

This simple setup provides the foundation for future analysis, allowing you to accurately calculate gross margin and understand departmental spending long before you hire an FP&A specialist.

Stage 2: Late Seed to Series A (The First In-House Hire)

The inflection point for a first in-house finance hire is typically between late Seed and Series A, around the $1M to $5M ARR range. The trigger is not just revenue, it is complexity. You know you have hit this stage when your outsourced firm is asking too many questions they cannot answer, your board is demanding a more robust forecast than your spreadsheet can handle, and you can no longer calculate key metrics reliably.

A scenario we repeatedly see is a SaaS company at $3M ARR preparing for a Series A. Their revenue recognition is a mess because they do not understand US GAAP (ASC 606) principles for multi-year contracts with variable components. They cannot calculate gross margin accurately because R&D salaries are mixed with customer support costs. The founder spends three days a month wrestling with a forecast spreadsheet before every board meeting. This operational breakdown is the signal that you need someone in-house who understands the business context.

The ‘Hybrid Hire Fallacy’

This is where founders often fall into the ‘Hybrid Hire Fallacy’, searching for a unicorn who is both a detail-oriented accountant and a big-picture FP&A strategist. In practice, this person rarely exists. The skills and mindset for meticulous, rules-based accounting are very different from those required for strategic, assumption-driven forecasting. Your first hire should be a strong generalist, often titled Finance Manager, who leans towards accounting. They must be able to own the monthly close, manage the audit process, and bring all accounting functions in-house. Critically, they must also have the aptitude and desire to build and maintain the company's first three-statement financial model.

Industry Context is Vital

Industry expertise is vital when choosing finance talent. A SaaS company might code an invoice as a marketing expense, while a biotech startup would classify a similar lab-services invoice as R&D. For a pre-clinical biotech, meticulously tracking R&D is everything. For instance, costs for developing a specific compound (an asset-based approach) must be classified separately from costs associated with a discovery platform technology. This detailed tracking is essential for grant reporting, managing clinical trial budgets, and for maximizing tax credits under schemes like the UK R&D scheme or capitalizing expenses correctly under Section 174 for US companies.

Stage 3: Series B and Beyond (Building a Specialized Team)

As you scale past $5M ARR, the generalist's capacity will be exceeded. The median company is around $6M in revenue at their Series B, according to SaaS Capital. At this point, the business needs departmental budgets, real-time performance tracking against those budgets, and sophisticated models for fundraising and strategic decisions. This is when specialized finance roles become necessary, marking the transition from a single hire to a true finance department.

Almost every founder reaches the point where one person can no longer be both the scorekeeper and the strategic planner. The solution is to build a proper finance team structure by splitting the function. This specialization allows each side of the finance house to develop deep expertise.

The Controller (Accounting Lead)

This person takes over the historical, compliance-driven work. They are your technical accounting expert, ensuring the integrity of your financial data.

• Owns the monthly, quarterly, and annual close processes.
• Manages the annual audit and relationship with external auditors.
• Ensures tax and regulatory compliance across all jurisdictions.
• Implements and maintains internal controls to safeguard company assets.
• Manages core accounting systems (e.g., NetSuite, QuickBooks).

The FP&A Manager (Strategic Finance Lead)

This person owns the future. They are a strategic partner to the leadership team, using financial data to guide decision-making.

• Owns the corporate financial model, including forecasts and scenario analysis.
• Runs the annual budgeting and re-forecasting processes.
• Provides budget-vs-actual analysis and partners with department heads to manage spending.
• Supports the leadership team with strategic analysis for fundraising, M&A, and new initiatives.
• Develops and tracks key performance indicators (KPIs) for the business.

This specialization prevents the common pain point of over-allocating your payroll to a single hire whose skills cannot scale with both transactional volume and strategic complexity, forcing a costly re-hire later.

A Practical Framework for Choosing Finance Talent

Choosing the right finance talent is about diagnosing your most immediate pain. Use this simple framework to guide your decision on your next hire in the FP&A vs accounting for startups dilemma.

• If your primary pain is... messy books, late filings, disorganized vendor payments, and a chaotic monthly close, then you need an Accounting solution. If you are under $1M ARR, this is an outsourced firm. If you are over $1M ARR, it is time for that first in-house generalist hire with a strong accounting background.
• If your primary pain is... an inability to forecast cash runway accurately, difficulty answering investor questions about unit economics, or a lack of visibility into future performance, then you need an FP&A solution. If your accounting is already clean, you can look for a hire with a stronger FP&A profile. This person still needs to understand the accounting, but their primary focus will be the financial model and business partnering.

What founders find actually works is to solve the accounting problem first. Strong FP&A is impossible without a foundation of accurate and timely accounting data. A brilliant financial model is useless if it is built on incorrect or outdated numbers. Garbage in, garbage out.

Practical Takeaways

Navigating the FP&A vs accounting for startups dilemma comes down to aligning your hires with your company's stage and most pressing needs. The path is sequential and predictable, creating a scalable finance function.

First, at the pre-seed and seed stages, resist the urge to hire a full-time finance person. An outsourced firm provides the right level of support for compliance and clean bookkeeping without the overhead of a salary.

Second, as you approach and surpass the $1M ARR mark on your way to a Series A, prepare to make your first in-house finance hire. Look for a generalist who is an accountant by training but has the curiosity and capability to manage a financial model.

Finally, around Series B and beyond the $5M ARR threshold, commit to building a dedicated team. Specialize by hiring a Controller to own the past (accounting) and an FP&A Manager to own the future (strategy). This structure provides the stable, scalable finance function required for high-growth companies. By matching the right talent to the right stage, you build a finance function that supports, rather than hinders, your growth. Continue at the Building Your Finance Team hub.

Frequently Asked Questions

Q: What is the difference between a Controller and a CFO?

A: A Controller is focused on technical accounting, compliance, and reporting on what has happened. A Chief Financial Officer (CFO) is a strategic leader who uses that data to shape the future, manage investor relations, lead fundraising, and act as a key partner to the CEO. The Controller reports on the past; the CFO builds the future.

Q: Can my first finance hire use fractional FP&A support?

A: Yes, this is a common and effective strategy. After hiring a generalist with a strong accounting focus, you can supplement their skills with a part-time or fractional FP&A consultant. This gives you access to high-level strategic modeling and forecasting expertise without the cost of a full-time senior hire until you are ready.

Q: How can I test for FP&A aptitude in a candidate with an accounting background?

A: Give them a case study. Provide a simplified P&L and ask them to build a simple three-year forecast based on a few key assumptions. You are not testing for perfect accuracy, but for their thought process, their ability to ask smart questions, and their comfort with ambiguity and assumption-driven analysis.