From being just an ancillary part of running a business, the finance department has emerged from the back offices to stand front and center as a major contributor to any company’s vision and direction.
Specifically, we’re talking about the department’s expertise in financial management, and how it is moving businesses further towards success in 2020.
What is Financial Management?
Financial management, which encompasses the effective planning, organising, controlling and monitoring of a business’ financial resources, is critical to scaling and growing operations, making stakeholders happy, positioning the company advantageously and ensuring long-term stability.
The proper management of financial resources has become such a critical part of a business’ processes that to leave it out in any overarching company strategy would be courting ruin.
So, what does a modern finance department look like, and how does it function?
So, how do you manage a finance department?
Not much has changed about the basic structure and roles within the modern finance department; what’s seen a recent revolution is the depth of the information it generates and how it is utilised on an executive level. From just creating reports on the financial health of a business, finance departments, through the CFO, now provide data insights and have a significant influence over and play a key role in planning major company shifts.
In fact, a recent study conducted by Accenture revealed that almost 80% of CFOs believe that they can help drive business-wide operational transformation.
That means it’s within the scope of their responsibilities to:
- Initiate and hasten digitisation transformation and automation (tracking invoices, payroll)
- Provide advice and find sources for long-term financing (banks, private lender debt, private investor shares)
- Conduct company valuation and prepare other documents for potential investors
If you’re still trying to wrap your head around how the finance side of a business is swaying executive-level decisions and how it can contribute to your company’s success, consult with one of the financial experts from Your Finance Department.
In the meantime, we’ve compiled a list of top tips to help you run your finance department better in 2020.
1. Update and keep track of your day-to-day finances and cashflows
We can never overstate how important it is to keep a clear and organised record of your business’ progress and day-to-day financial transactions. Particularly, you’ll need to know the minimum amount of cash burn your business has in a given period in order to manage cash flow and provide a cash runway to cover costs like rent and wages — and, more importantly, manage strategies to avoid going lower than that figure.
Additionally, when running a finance department, you need to stay on top of working capital more generally, bank account, stock coverage, late customer payments and supplier bill payments. Diligent bookkeeping is the first piece of the puzzle and will save you significant time and accounting costs when you review your position against financial targets during monthly or quarterly reviews.
2. Issue invoices promptly and track client payments
Your business doesn’t have a bottomless well of funds to draw from, so it’s critical that you have money coming in on time. You can’t do that with delinquent customers. An effective credit management system, coupled with clear and accurate invoices, and a routine collection process will help avoid major problems from cropping up due to late customer payments.
3. Stay on top of your tax obligations
Neglecting to file your tax returns (sales and income) and make payments will come to bite you back later in the form of fines and a hefty interest. Avoid having to deal with these unnecessary costs — and be confident that you’re only paying what you owe — by staying on top of your tax obligations through complete and accurate bookkeeping. Contact an outsourced financial services provider for further support.
4. Monitor and control overhead costs
Running a business means you’ll always incur some form of overhead cost, from office equipment usage to stationary and even the temperature control in the work area. But that doesn’t mean you can’t operate more efficiently and reduce costs. Spearhead employee behaviour changes and other energy-saving practices in your office.
5. Manage and control the sale of company stock
Seeing to it that you have enough cash in hand is tied to controlling the amount of stock you have available. A well-managed finance department will implement systems so that they can keep track of company stock and ensure that working capital isn’t tied up unnecessarily.
6. Review and examine your funding options
Based on its size and operations, a business will have different cash requirement needs. If you’re an SME, you usually need an arrangement that covers business overdrafts and personal funding, though it will still ultimately depend on the nature of your business and your industry. Review and examine your funding options regularly to see if they are still a fit with your business plan or if you can source this need more efficiently with new providers.
7. Digitise your encoding and communication processes
Not all businesses need to be on the cutting edge of technology and digital transformation to achieve success. With all the innovations available these days, however, it’s the least you can do to shift from manual processes and adapt simple automation tools, which utilise big data and analytics that you can use to make more intelligent, insightful and informed business decisions.
Another non-core business staple is your software and communications (i.e. mobiles) . Improve communication and connectivity between your operations and your finance department into the future by introducing better communications tools and supporting continued training so that they can deal with people as well as numbers.
