- Cash flow struggles and missed funding opportunities often start with outdated financial processes.
Financial systems that will grow with your business aren’t a nicety—they’re a necessity. As revenues increase, so do expenses, and without adequate oversight, small problems can mushroom quickly. Currently, 66% of small businesses are facing serious financial struggles. Most of these problems are due to incomplete or out-of-date systems that are not equipped to handle growth. Without a good process in place, owners are often behind on billing, do not know when payments are late, or are not able to project correctly.
Cash flow is the number one cause of business failure, with 82% of businesses closing their doors because of it. Capital availability also controls how businesses grow—or don’t. In a recent poll, 68% of small business owners reported that financing is the most critical factor to growing. Nearly half of the survey participants said they could raise their revenue by 30% to 100% if they were provided with proper financial support. Strong, scalable systems don’t guarantee funding, but they make it easier by making it easier to qualify for loans, track performance, and fix issues before they become threats.
Today’s way of working is vastly different than it was a decade ago. The processes and methodologies in which we collaborate, share information, and report progress have adapted to technology. However, financial management systems are frequently antiquated, largely due to compliance complexities. Companies that modernize their financial management processes and tools can gain an advantage in nearly every industry. Strong financial management is the cornerstone of your business and the more reliable, accurate, and detailed your financials are, the better.
1. Centralize Financial Management Tools
Data management is increasingly a challenge for organizations and ignoring the problem only invites risk. That’s why organizations should centralize their financial management tools by utilizing cloud based software.
Teams can simplify their finances and get more done with online accounting software. With real-time access to financial data, everyone is working with the same information. Set user permissions to grant role-based access and responsibilities within your platform. This way, your accounting team can enter invoices and expenses while your CEO can get a locked-in global view.
2. Establish Policies and Procedures to Standardize Processes
Everyone appreciates a seasoned colleague’s expertise and insights, except when their knowledge is locked away in their brains. Extract time-tested processes and knowledge, and memorialize them into company wide policies and procedures. This detailed exercise is deserving of its own project as consistency and thoroughness are essential.
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Start by polling your team on their core repeatable processes to begin your list of procedure-ready tasks. Implementing this standardization ensures your team is working from the same playbook which will improve accuracy and stability. Develop step-by-step procedures for approvals, budgeting, and reconciliations. Create templates for invoices, reports and purchase orders to reduce the guesswork and obtain essential details.
Document your processes and have an annual review timeline to ensure they still reflect your current state. You may add new details to process these or incorporate new tools that should be included in your procedures. Finally, have your team review and sign off on them after your annual review to improve accountability and communication.
3. Integrate Compliance Checkpoints Throughout Your Team
Managing compliance requirements doesn’t have to be a stressor. Democratized access to compliance requirements based on your business and locations. If you’re an international organization, tap into insights from accounting teams with familiarity on local tax laws. Consider working with third parties to handle international hiring, if your team would prefer to outsource the responsibility.
Your cloud-based accounting software can issue reminders and provide tracking updates for tax reporting. While your team may be accustomed to managing their schedules around financial close, your software can streamline tasks and timelines. View your collaboration spaces as an additional team member to help keep you on task and compliant.
4. Tighten Your Budgeting and Forecasting Calendar
Teams are doing more work with less support, largely due to easy accessibility of information. However, financial teams can feel a pinch when collecting data from multiple sources. Centralize your financial data and automate reports to keep key colleagues informed and alerted of financial red flags.
Give access to appropriate team members to contribute and monitor budgets. Schedule regular forecast check-ins and convey expectations for team preparedness. Leaders will need to set the tone on how these check-ins will be conducted, so plan ahead for meeting preparation. Utilize a standard agenda and inform colleagues of what information to bring, and if they are set to present data. You may have smaller weekly meetings with core administrators that feed into quarterly reviews with department leads.
Assign an accounting team member to serve as the primary contact for each cost center. This can help build relationships with teams and more familiarity with their budget needs. Track variances and jumps in expenditures that can inform forecasts. For example, if an urgent mailing puts postage costs into the red, that could indicate need for better forecasting. Similarly, multiple months of exceeding budgeted amounts for printing may signal the need for a higher budgeted amount next year.
5. Utilize Automation for Regular Reporting and Red Flags
Automation may trigger a negative reaction amongst your risk averse accounting team. However, automation doesn’t mean that your financials are without oversight. In fact, automation and the rules driving each task can improve financial tracking and catch errors before it’s too late.
The more manual work your team does, the more risk it invites, even with standardized processes. People get sick, take vacations, and have other deadlines to manage. Automations help gather key data, packages it, and distributes it to key people.
Utilize real-time financial dashboards that display the information your team needs to see at a glance. Develop customized dashboards for leadership outside of the finance team to help democratize access and reduce unnecessary touchpoints. When your CEO can view up-to-date dashboards on your profit and loss, they’re well-equipped to make informed decisions.
Evaluate Systems Methodically to Stay the Course
Stay on top of managing your systems by establishing a consistent, repeatable, and dynamic evaluation process. Consider evaluating your effectiveness quarterly, which provides a reliable schedule for check-ins that align with other reporting tasks. Standardize your evaluation markers, how you scale effectiveness, and where you source the information.
