Are you looking to grow your business? As part of your strategy, are you putting together the right accounting and finance teams to help you achieve your business goals?
Many entrepreneurs are involved in the accounting and finance side of the business as a way to save money – and sometimes because there’s no internal personnel to handle it. As companies seek to grow, a section of the business that often doesn’t get enough investment in dollars and manpower is the accounting department. But not paying attention to this crucial part – regardless of your industry – is what stops companies from becoming a competitive force.
What is a finance team?
A finance team is a department within your organization that handles all functions related to your company’s financial well-being. Generally, a finance team is responsible for a variety of tasks – including accounting, recordkeeping, administrative work and cash flow. A finance team is also in charge of all duties related to your organization’s capital funds, including acquiring and managing these funds. Often overlooked, the finance team has the knowledge to teach you how to effectively grow your business.
Bottom line: A finance team can make your company’s daily operations more organized, keep your business competitive and allow faster growth.
Roles and responsibilities of a finance department
The finance department is a group of teams, with each one handling a different aspect of your organization’s funding. Here’s a list of what a finance team can do for your business:
- Forecast your future budget. A finance team can review your budget and provide vital feedback on future expansion necessary to maintain efficiency. Based on this information, you can prepare for major costs well in advance.
- Make long-term investments. A finance team can also serve as an advisory board regarding the best routes for high profit margins. This includes locating reliable sources for funds to grow your organization and issuing shares to company investors.
- Pay taxes. Every organization is required to pay taxes, and this is the responsibility of the finance team. They can also build and maintain strong relationships with government entities – a great way to stay abreast of any legal changes that impact your industry.
- Create budgets. A finance team would partner with your company’s leaders to determine a realistic budget. They would also tell you how spending would impact the long-term success of your business, based on patterns they’ve recorded from the organization’s transactions.
- Organize the books. Bookkeeping is one of the main responsibilities of the finance team. This means recording your business’s daily transactions, such as sales and expenses. The bookkeeper should also be prepared to explain these when necessary.
- Analyze data. The finance team analyzes your accounting data and uses it to create comprehensive statements. These are used to measure your business’s growth on a regular basis, and they’re a great way for managers to keep track of key funding sources.
- Track cash flow. The finance team maintains all cash flow statements. These records detail transactions with vendors and creditors, and respective payment dates. The finance team’s cash flow records are also used to ensure funds are available for daily operations.
- Advise leaders. Information gathered by the finance team is a reliable source for you and your managers when you’re making strategic decisions. The finance team advises leaders on which projects to undertake, how much of your business’s earnings should be distributed as dividends, and which markets to pursue.
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The finance team plays a crucial role in any organization’s success. Regardless of how small your business is, this is one department that you shouldn’t wait to add to your company. A good finance team can create a map leading to major profits.
Importance of a strong finance team
A strong finance team can grow your company in ways you’ve never imagined. While you may know the direction you want your business to go in the future, a finance team has the expertise to break that long-term vision down into practical steps with a realistic timeline. They use detailed, current analytics of your business to provide your leadership team with a much more intricate overview than the standard ones many small businesses rely upon. This information often accounts for growth through funding sources, which can catapult your success.
This is why it’s so important to create a strong finance team – made up of more than just an accountant. It should include a cluster of experts who are not only familiar with the legalities of your industry, but have interpersonal skills to explain the analytics to your management team.
Bottom line: Small businesses often do not focus on building a strong finance team, but the value of one should not be underestimated.
How a finance team improves lending chances
Credit lenders across the board rely heavily on your company’s financial reporting abilities when considering your loan application. Consequently, the quality of your accounting and finance units is important, as are accurate financial statements. With better reporting and a strong finance team comes a higher possibility of financing options. [Looking for funding for your business? Check out our picks for the best small business loans and financing options.]
However, if the financial data you provide has many holes in it, took months to procure, or doesn’t reconcile, the likelihood of finding a willing lender will be low. There are options – like invoice financing and a business equipment loan – that can still provide the capital solutions you need, but they may come at a much higher cost. There are times when new top accounting software is necessary, but other times when hiring an experienced controller is worth the investment.
The most important approach is to have self-awareness and the transparency to determine if you’re investing appropriately in this crucial part of your business. This decision has ripple effects on your profitability, your ability to borrow money and your daily stress level. While you may find yourself preoccupied with the big picture, remember it’s the small things that will get you there, and a good finance team always has their eyes on the details.
Dachondra Cason contributed to the writing and research in this article.