Jerome Schaufeld knows that financial systems often don't keep pace with growing companies. So in 1985, when he and Gordon Sharp started Phoenix Controls, a $10-million airflow-controls manufacturer in Newton, Mass., they set up these financial and personnel benchmarks:

* Start-up. The office manager tracks cash flow manually or on simple spreadsheet software. As you collect venture capital and bring on board members, you graduate to inexpensive accounting software that provides a general ledger and produces financial statements.

* Thirty employees. As sales grow, so does complexity. You need more financial formality. The bank handles payroll; an in-house accounting assistant handles accounts payable; an accounting manager supervises the bank, negotiates insurance rates, keeps the ledger, and prepares board reports.

* Seventy-five employees. An assistant takes over receivables, freeing the department head to analyze numbers and manage the bank. Need more sophisticated accounting software capable of integrating various departments.

* One hundred twenty-five employees. You're looking overseas, getting ready to go public. You need a chief financial officer who can oversee the controller's budgeting, knows international tax and labor laws, and has public-company experience and finance connections.

These benchmarks enabled Schaufeld to develop in-house the talent most CEOs import. Nancy Cullen is a prime example. Hired in 1986 as office manager, she easily handled simple bookkeeping. As Phoenix grew, colleagues advised Schaufeld and Sharp to hire an accountant; instead, they brought in an accounting temp to tutor Cullen, who completed night courses. By 1988 she had delegated the clerical work and become accounting manager.

In 1990 Phoenix switched from Peachtree's general-accounting software to ASK Computer's ManMan, a sophisticated financial-management program designed for manufacturers. Cullen took ASK classes and meets weekly with an ASK consultant. In 1991 she became controller.

Soon Phoenix will hire a CFO. The position demands qualities that, Schaufeld says, his company can't grow at home. But he's prepared the company for that change. "When you're growing fast, you have to lead the target."

-- Michael P. Cronin