Does business growth drive the evolution of its finance function, or vice-versa?
The evolution of a finance function from a basic compliance tool to an analytical machine (shaping decision-making and strategy) is key in driving the development, strength and resilience of a business.
Most organisations begin life with rudimentary finance processes and then build on this organically based on the most pressing needs of the business at that time. This can lead to an ad-hoc and disjointed selection of software and procedures with limited integration, leading to the need for manual data transfer, errors and delays.
Getting the basics right – Controls, software and support
Those businesses that set up simple but effective financial and management controls, with the right mix of software, staff and external specialist support, are more able to produce simple but robust financial reports by getting the basics right. This solid foundation then allows greater agility to expand, evolve, and react to change to support growth through streamlining processes and efficiently producing more complex management information such as cashflow forecasts, budgetary reporting and KPI dashboards.
One of the biggest mistakes for early-stage businesses is not having a finance platform which can evolve and scale-up as needs change. These limitations can prevent financial data from being available to support decision making at key stages of the business’ life cycle i.e. when going to market to obtain investment or loan funding.
Currently the post-COVID economy shows signs of a solid recovery, although very much remains dependent on the level of COVID-19 restrictions in place over time. However, it is important that business owners consider how an effective finance function can help steer the business along the bumpy, winding road to recovery and emerge onto the post-COVID autobahn at maximum speed (stretching the metaphor here, but let’s press on!).
The road to recovery – how can an integrated finance function help?
Consistent, timely and accurate cost reporting can help identify areas to look for potential savings on overheads and expenses – particularly if reported against comparable periods and / or budgets.
Reporting by product, service line, project or department will assist in highlighting a business’s most profitable or unprofitable products or services. Actions can then be taken, whether it be focussing more time and resources on the more profitable areas or making greater efforts to improve margins on less lucrative products.
Employment of budgets and forecasts help to predict, plan and manage future resource requirements, recruitment, and capital investments.
Improvement of staff experiences around timesheets, payroll and expense claims by use of technology to reduce lost receipts and speed up reimbursements.
Streamlining of sales invoicing and cash collection by facilitating staff in the field to be able to raise and issue invoices directly to customers and expedite payment via card or bank transfer.
Production of good quality and timely management information to support growth forecasts and identify measures of business success that allow you to track progress and gauge performance – be it financial or operational – through relevant KPIs.
Undertaking real-time bookkeeping to maintain accurate records and support short term cashflow management – this allows you to respond quickly to issues as they happen and potentially before they even arise.
Ensuring that the vision and aspirations of the management team is aligned with the financial capabilities of the organisation – being able to judge what finance may be required, and when, and helping determine the best sources of funding. This can prevent the business’ growth contributing to over-trading and endangering current cash-flow and future success.
Helping to support the organisation’s overall digital strategy and promoting a technologically proficient culture within the business.
How can we help?
If you want to discuss how a well-oiled finance function can contribute to a higher performing business, then please contact Simon Armstrong below. We help organisations across all sectors to research, design, implement and run agile and effective finance functions.