One of the things I learnt when I left corporate life and set up my own company was the value of other people’s expertise. Yes I could write copy, design a website or deal with IT problems myself but that took me many times longer than a professional and the results were never half as good. So I also believe that while most growing businesses may ‘cope’ without financial expertise it’s quicker and more productive to employ a commercially experienced finance professional, either part-time or outsourced.
Just about everything you do in business impacts your finances, in turn your finances affect what you can do in your business. So really measuring and understanding your financial data can substantially improve your business.
An experienced financial expert can help you
- Save time
- Save money
- Improve cash flow
- Plan more effectively
- Spot and respond to opportunities
- Spot and respond to risks
Not a definitive list!
Streamline and save time
You are required to keep accounts in a certain format for the purposes of:
- Company law and accounts filing
- Taxation authorities – corporation tax, VAT and employee taxes which all have slightly different requirements and reporting periods
- Stakeholders such as banks who may want to see accounts monthly
Understanding these various information requirements means that data is collected in an easily accessible and analysable format thus reducing bookkeeping and administrative time. Time spent compiling information for statutory purposes can simultaneously provide measures that help you understand and control your business.
A well organised accounting system will save you money. Depending on the business there are numerous ways this can be achieved by ensuring:
- You cover all costs when charging for products or services
- You raise an invoice for all goods and services supplied
- You hold the optimal stock levels to avoid damage and other stock losses
- You are correctly charged for goods and services
- You do not pay twice for goods or services or items you have not received
- You obtain any discounts offered for early payment
Improve cash flow
There are numerous ways to improve your cash flow:
- Raising sales invoices on a timely basis
- Tight credit control ensuring monies collected as due and reducing the risk of bad debts
- Choosing the optimal timing and type of investment
- Obtaining good credit rating and supplier credit terms
Good financial analysis and measures will give you better business information and lead to better decision making. You have an overview but do you know:
- Which products or services produce the best profit
- Which of your customers are most profitable? (Not necessarily the ones with most sales)
- What your probable cash flow looks like for the next few months
- How your business plans may affect your cash flow
- Breakeven – i.e. at what level of sales you will cover all your costs and start to make a profit
Good informed measurement and analyses enable you to choose the best plan for your business. If you don’t fully understand how all your costs are structured it is unlikely that your business plan will produce the most profitable outcome.
What-if measures and analyses will help you assess the likely outcomes of plans by looking at the downside risks and upside gains.
Opportunities and risks
Financial information and/or advice needs to be relevant and timely to enable you to spot the opportunities (a very profitable product) or quickly adapt to threats (a sudden downturn in demand for certain products). Cash flow analyses can alert you to the need for an overdraft or other outside finance. Understanding the financial impacts of business activity can make the difference between business survival or prospering.
If you are running a successful business but find that your business figures do not help you direct your business then ask for more or different. Financial expertise can be offered under a number of titles, Finance Director, Accountant, Financial Controller, but commercial experience and business clarity are the main elements to look for.
I welcome any comments or questions.