How and When to Grow Your Company's Accounting Function When people start businesses, they don't always think about the ancillary tasks that keep those businesses going. Accounting, for a start.

Shortly after we had started our consulting firm, Whitestone Partners, we began an engagement with a home healthcare business. As we do in almost all of our engagements, we asked to see the company's financials.

In response, the owner reached behind her and grabbed a three-ring binder, from which she extracted three pages, neatly stapled in the top left corner. Immediately, we could see that she had never even looked at those financials, because the paper by the staple contained no crease -- which would have been the case had anyone looked at the second page.

That was unfortunate, because when people start businesses, they don't always think about the ancillary tasks that keep those businesses going. For instance, few like to think about accounting. However, if you're going to stay in business any length of time, you'll need to perform some accounting functions.

Related: How to Hire an Accountant

In our experience, accounting functions in businesses that start as a one- or two-person operation and grow to midsize tend to progress through several steps. Obviously, you don't need a chief financial officer (CFO) on day one. But you will eventually need people to help you transition. We've outlined the three progressive steps below explaining how to know when it's time to do that.

Part-time or external-service finance professional

When a business starts out, it usually can't support a full-time finance person. Nevertheless, you need to keep accurate accounting records from day one. If you lack the skills, it is often best to utilize a part-time professional and/or an service. You'll need to accomplish three distinct tasks:

Setting up and overseeing your accounting system. Many new businesses use QuickBooks, but other accounting packages are available. You'll need to get your company set up by establishing a chart of accounts and determining the format for financial reports. En route, you will run into issues you hadn't thought about when the books were initially established. You'll want to periodically review the setup to make needed adjustments.

Bookkeeping. This is the day-to-day entry of transactions into your accounting system and preparation of checks and invoices. More modest skills than those of whoever set up your accounting system will work, here. You may even take this on yourself, or employ a part-time person or an external service.

One tip is to avoid using cash and instead make sure you run all transactions through the checking account or a company credit card. This will give you a record of every transaction. Another tip is to make sure that you review any money that leaves the company (e.g., via checks, credit card charges, payroll, etc.).

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Fraud protection. Unfortunately, fraud in small businesses is rampant. According to a University of Cincinnati survey, more than 60 percent of small businesses experience employee fraud and theft. These periodic checks will protect your business and remove temptation from your employees.

Tax preparation -- You will also need a tax preparation person. This skill set is different from that of the two jobs described above -- although the person who set up your accounting system may also have the skills to prepare your taxes. Depending on your business, you may need to pay sales taxes, quarterly estimated taxes, payroll taxes, etc. It's complex. Consult an expert.

Full-time bookkeeper, with part-time CFO

As the company grows, bookkeeping tasks will take more and more time. Eventually, your part-time bookkeeper will become full time or you'll see some economic sense in hiring a full-time employee rather than continuing to outsource your bookkeeping.

That bookkeeper won't be enough, however; he or she will need access to a person with a skill set that is broader and deeper: an external, part-time or fractional chief financial officer.

This CFO should review the bookkeeper's work and be available to answer questions. He or she will also work with the owner to interpret financial statements and internal metrics, develop financing strategies (e.g., with banks and investors), tackle tax planning, establish internal controls, develop forecasting budgets and, depending on the industry, handle compliance issues.

As Deloitte has described it: "Today's CFOs are expected to play diverse and challenging roles." They act as stewards, protecting the company's assets. They assist in financial planning and analysis, tax and treasury tasks.

Full-time CFO

The final step in the progression is that it will become cost-effective for you to hire a full-time CFO. This typically happens when the cost of your external CFO service equals what you would have to pay a full-time employee, or when your part-time CFO is working 40-plus hours a week to keep up with the work.

At that point, you will likely have augmented your internal accounting staff. For example, you may have one person handling general ledger and payroll, while another does accounts payable and accounts receivable.

Accurate books are essential to running any small business effectively. Unfortunately, it is an often overlooked task. You should make sure that you have the proper accounting support as your business grows.

Related: A CFO's Perspective on Mastering Time When Your Startup Needs You Most

As to the home healthcare owner we had, a few one-on-one sessions helped her fully understand and appreciate her financials. We transitioned her from Step 1 (part-time bookkeeper) to Step 2. She now has a full set of metrics that she understands and uses to run her businesses. She also has a competent full-time bookkeeper and a fractional CFO, the next steps on the path to a successful accounting function.