If you miss any of these articles, don't worry. They are on the Creative Finance & Management blog. Just look for the "New_Subscribers" tag.
These are the articles in the New Subscribers series:
1. The ingredients for success in Finance
2. Strategy and Planning
3. Business Change - implementing your strategic plans
4. Measurement and Management go together
5. Paralysis without analysis
6. Your Finance team - a valued asset
7. Stakeholder management - the importance of keeping people happy
8. Internal Control - 3 fallacies that add risk to your business
Here we go: ...
1. The ingredients for success in Finance
2. Strategy and Planning
3. Business Change - implementing your strategic plans
4. Measurement and Management go together
5. Paralysis without analysis
6. Your Finance team - a valued asset
7. Stakeholder management - the importance of keeping people happy
8. Internal Control - 3 fallacies that add risk to your business
Here we go: ...
Your Finance Team - a Valued Asset
If you have read all the articles that we have sent to you in this new subscriber series, you will hopefully have learnt something not only about managing business performance, but also about the skills and expertise that professional finance people can bring to your business. So I'm actually not going to labour on about the value of finance people and accountants, as the title suggests.What I am going to do is try to get you thinking about what resources you might need in your Finance function. Perhaps there may be areas you haven't thought of. And if I can help you to get your Finance function fit for purpose then your business performance wheel will turn a lot more smoothly and you will be more successful.
I'd like to think about the Finance function as a set of resources consisting of processes, systems and people. People operate processes, and systems help to facilitate and automate processes. All the elements interact with each other.
Let's think about how Finance functions develop as a business grows, as that may indicate the priority of various elements.
The first thing you ever employ an accountant to do is to set up your company and then prepare and audit its annual accounts and tax computations. This is almost universally true of small businesses - even I have an accountant who does that for me, and I'm a qualified accountant myself!! This is what I would call the compliance requirement.
Above a certain threshold the law says you have to have an audit (if you are trading through a limited company), so you will never get away from a relationship with an external accountancy practice. But you may get to the point where you have the expertise in house to prepare the accounts and save money on their fees! Only the very very big companies have internal tax people, and even they still spend money on tax advice from the accounting firms.
In the early stages you record all the transactions yourself. After a while the business gets too big for you to cope with that, and so you employ a bookkeeper. You also have an accounting system. This is the transaction recording requirement.
In the early days your accounting system may have been a book, a file or a spreadsheet. Then you may have got a proper package like Sage or MYOB. Perhaps you've now got to the stage where you've moved onto something more flexible and with better functionality - like Microsoft AX, Great Plains or Navision.
The key things about your accounting system are that it is there to help you meet both the compliance requirements (holding proper accounting records, and doing VAT returns), and to help you measure your business performance. It becomes a key enabler of your business performance management wheel. If you want information out of it to measure your performance you have to be able to put accurate base data into it somehow. And that's where you need to have a look at the transaction recording processes and see whether you have a problem with GIGO - "Garbage In Garbage Out"!
Back to the growth story... So you're employing a bookkeeper to record transactions in a system, but you are writing the sales invoices yourself and paying your suppliers with your chequebook, your business debit card or through internet banking. At some stage that gets too onerous, so you take on an accounts clerk or two. They take care of the operational finance and control requirement.
So you may now have a Purchase Ledger Clerk recording the supplier invoices and preparing payment runs for you to authorise. You may also have an Invoice Clerk, preparing all the sales invoices to send out. On a part-time basis you may also have a Payroll Clerk or outsource the payroll to a bureau. Between them they could also take care of the bookkeeping requirements, but you may then want an accountant to make sure that all the operational finance, control and transaction recording processes are tied together.
I added the word control in with operational finance to indicate that once you delegate your invoicing, recording and payments, you need to have controls to ensure that people are doing things correctly. This is even more true when you are employing more people elsewhere in the business, since they will need procedures to follow to spend money or commit the business to contracts. I will talk more about this in my eighth article in this series. The point for now is that transactional controls are guarded by the Finance team on your behalf.
By this stage you are normally struggling to get information out of the system to measure the performance of the business if you try to do it yourself. If you are taking note of what I've been saying in previous articles then unless you are a whizz with Microsoft Excel spreadsheets, database queries and pivot tables, you will probably already have an in-house accountant doing reports for you. This is the business performance management requirement.
So you see, whilst I have been talking about business performance management constantly in these articles, I do understand that there is a lot more to the core Finance function. And these core activities need to be managed properly and grow with the business.
Conversely, these weekly articles may have opened your eyes to how much more can be built on your core Finance team in order to help you to manage the performance of the business.
At some stage of growth the business will need a Head of Finance or a Finance Director, a fully qualified accountant with a few years of business experience, to help you manage the full range of core finance (compliance, transaction recording, operational finance and control) and business performance management activities. Has your business reached that stage yet? Have these articles opened your eyes to how much more you should be doing to manage your business performance?
For many businesses there will be a stage where they have a small Finance team and know they need to do more in the realm of business performance management, but they cannot justify the cost of a senior Finance person or think there wouldn't be enough work for a full time role. The fledgling Finance team also probably needs some guidance and direction from someone more experienced.
That's where a flexible service such as the one offered by Charis FD comes in handy. We can provide advice and hands on support in all elements of business performance management, including helping you manage your Finance team, on an ongoing basis. And we can do that by being on site with you anything from one day a month to two days a week or more. Have a look at our website for further details.
If at any stage you want to talk to us, we're quite happy to give you a call to talk more about your business and the challenges you face. And you may be eligible for a free Finance Strategy Review session. To set that up either email us at enquiries@charisfd.com, remembering to leave your phone number and email address; or go to our website and complete the contact form.
Thanks again for subscribing to Creative Finance & Management. We hope you find it helpful.
© Charis Business Consulting Limited 2009
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