New private equity managers are investors first and operators second, and the gap shows up fastest in the back office. Standing up finance and operations — fund accounting, audit readiness, compliance, treasury, and tax — takes more time and specialized expertise than most first-time founders expect. Underestimating it can delay a first close or surface a compliance problem before the fund is fully running.
The firms that get this right treat finance and operations as foundational infrastructure: they stand up five specific functions early and decide deliberately whether to build that capability in-house or outsource it. Here’s what each function requires, and how emerging managers reach a compliant, scalable back office without pulling focus from fundraising and deals.
Why the Back Office Catches Emerging Managers Off Guard
Most new fund managers come from a deal or investing background, where the work is sourcing, diligence, and returns. The behind-the-scenes machinery of a private equity firm — fund administration, management company (ManCo) accounting, regulatory compliance — sits outside that experience, so it’s easy to assume it can be handled later or by a single hire. The back office is where an emerging manager’s credibility with limited partners is won or lost, and it has to be operational before the first capital call.
The consequences of getting it wrong are concrete: a failed or delayed audit, shaken LP confidence, and regulatory exposure that can follow a young firm for years. A private equity back office built on the right functions from day one is what lets a manager scale assets under management without re-engineering operations every time the firm grows.
Five Finance and Operations Functions Every New PE Firm Must Stand Up
Building out the finance and operations function of a new fund is foundational to the firm’s success. Five functions carry the most weight for early-stage leaders, and each one needs an owner and a process before the fund is live.
1. Financial Statement Audit Readiness
Choosing an independent auditor is one of the first steps in building the back office. The auditor should have genuine private equity experience and be accredited to provide audit and attestation services that meet annual and interim reporting requirements under U.S. GAAP and IFRS. They should also deliver a readiness gap assessment covering current accounting knowledge, staffing, and reporting frameworks, so weaknesses surface early. Audit readiness is a standing discipline, established at launch and maintained every reporting period.
2. Fund and Partnership Accounting
Early-stage firms need accounting advisory to set up fund and partnership accounting correctly from the start. That covers the general ledger, partner allocations, gain and loss allocations, fund controlling, and valuation pricing. It also means keeping fund accounting and management company accounting distinct, since the ManCo back office runs on its own books and reporting cadence separate from the funds.
3. Treasury Management
Bankers at reputable institutions with PE experience can help new leaders build the policies that govern cash. That includes cash management procedures and controls against the phishing, wire fraud, and cybercrime that increasingly target capital movements. Treasury controls are a security function as much as a finance one, and they need documented procedures before money starts moving.
4. Regulatory Risk and Compliance
New leaders have to decide whether to hire a full-time compliance officer or outsource the role. It’s sometimes merged with the CFO seat early on, though that’s rarely a durable arrangement. Finance and compliance should stay separate functions that coordinate closely, so neither one becomes a blind spot as the firm takes on more regulatory obligations.
5. Tax and Advisory
Tax operations for PE firms are more complex than ever, which makes experienced advisors essential. The right tax partner specializes in private equity and runs on technology that scales as the firm grows, so the tax function keeps pace with new funds and structures. Tax planning also overlaps with transaction work, where state and local tax complexity can complicate diligence on both the fund and its deals.
Build the Back Office In-House or Outsource It?
Once the five functions are defined, the real decision is how to staff them. Building in-house means recruiting PE-experienced finance and operations talent and selecting systems while also trying to raise a fund. Outsourcing to a Finance as a Service (FaaS) provider delivers the same functions on a tested platform, which is why a growing number of emerging fund managers turn to outsourcing for the back office.
| Consideration | In-house team | FaaS partner |
|---|---|---|
| Time to stand up | Months of hiring and system selection | Operational in weeks on a tested platform |
| Expertise | Must recruit PE-experienced F&O staff | Fund and ManCo specialists included |
| Scaling with AUM | Re-hire and re-tool as the firm grows | Platform scales with the fund |
| Founder focus | Pulled into the back-office build | Stays on fundraising, deals, and LPs |
For most early-stage firms, outsourcing the back office is the faster path to a compliant, audit-ready operation. A FaaS partner brings the integrated platform, tested processes, and specialized talent that would otherwise take quarters to assemble. Consero’s model is built for exactly this: outsourced finance and accounting for investment management firms, covering AP/AR, expense and cash management, month-end close, timely financial reporting, and year-end audit and tax readiness, plus human capital support for payroll, HR, and benefits. The advantages compound as the firm scales.
Getting to a Back Office That Scales With the Fund
A back office built right frees a new manager to do the job they raised the fund to do: source deals, build the portfolio, and earn LP trust. Standing up audit readiness, fund and ManCo accounting, treasury, compliance, and tax on an institutional-grade platform from the start means the firm scales on that infrastructure, with no scramble to retrofit it later.
Consero provides that platform through Finance as a Service for investment management firms, the same approach Base10 Partners used to run its ManCo back office. Contact Consero to map the finance and operations functions your firm needs before its first close.
Frequently Asked Questions
When should an early-stage PE firm move its back office in-house?
Usually once the firm has the assets under management and deal volume to justify a dedicated finance and operations team, often across multiple funds. Until then, the fixed cost and hiring time of an in-house team are hard to justify against a FaaS partner that is operational in weeks. Many firms keep a hybrid model permanently, holding a senior finance lead in-house while a partner runs the transactional and fund accounting work.
Does an early-stage PE firm need separate fund accounting and management company accounting?
Yes. Fund accounting tracks the partnerships, capital accounts, allocations, and valuations at the fund level, while management company accounting runs the firm’s own operating books — payroll, overhead, and management fee income. They use different reporting cadences and serve different audiences, so keeping them separate from day one prevents costly untangling later.
How early should a new PE firm set up finance and operations before its first close?
Before the first capital call. The auditor, fund accounting setup, treasury controls, and compliance framework all need to be in place when capital starts moving, because retrofitting them under a live fund is far harder than building them in advance. Treating finance and operations as a pre-launch workstream, alongside fundraising, keeps the firm from playing catch-up once the fund is active.
