It takes a lot for an entrepreneurial venture to achieve success. It takes even more to maintain that success.
What separates the organizations that are “one-hit wonders” from those that are “built to last”? One key driver is robust budgeting and financial planning.
It’s the time of year for annual budgeting again, and the planning done in Q4 is critical to the success of the upcoming year. This is also the time when organizations identify financial and operational pain points to set goals—not just for the coming year, but to realign with long-term strategies, as well.
The importance of this re-evaluation period is significant. Often, companies reach the pinnacle of success but fade away quickly due to inefficient long-term financial strategies. According to McKinsey, 43 percent of CFOs believe streamlining budgeting processes is a priority in order to react more quickly and efficiently to business changes.
Data-driven strategies and financial planning are therefore imperative for a business to stay relevant and profitable. An efficient financial system speeds up reporting to analyze business performance.
But buying a new accounting software does not have to be the answer to operational effectiveness. Sometimes, it is best to optimize the existing systems and processes. By doing this first before considering a new software, companies can make informed decisions for their investment and ensure they have comprehensive accounting systems and processes in place.
Even if a new ERP system is the answer, optimizing your current systems and processes will aid in the adoption and implementation of the new software.
Just in time for your annual budget planning and goal-setting meetings, here are four simple steps to streamline your existing financial systems and processes:
The first step for financial planning in business is to assess the current state of your financial and operational systems. One way to do this is by keeping a tab on financial reporting and analysis.
For instance, drawing insights from balance sheets is an effective way to know about your company's capital mix. The gathered data can help a company or business assess its financial status.
Similarly, reviewing operational reports is key to streamlining resource allocation, production or manufacturing costs, and accounting. For a consumer product goods company, this can mean tracking production rates or tracing inventory usage.
These reviews can help identify high-priority areas where you need to assign budget or create goals for the coming year. They can also reveal the speed and efficiency your current systems offer for gathering insights.
A lack of transparency between departments can impact decision making. Therefore, it is essential to gauge the financial support needed by your leadership team and departments to ensure they are on the same page. These needs can include cash flow statement analysis or expense management.
You should have a system to track team expenses, including the reimbursement process if your team members are struggling with expense management. This effort reduces the chances of money mismanagement. Your business must have accurate and timely cash flow statements because poor cash flow from operating activities can lead to cash shortages.
Ineffective supervision also results in uninformed decision-making by subordinates, putting the company’s resources at risk.
Therefore, it is imperative to monitor, control, and forecast cash flow within the organization.
Before buying a financial tool for business decision making, you should ascertain what more you can do with your current financial reporting tools.
Does your reporting tool provide real-time insights into financial data, or does it let you draw automated data insights? Answers to such questions will help understand what value your financial systems can add.
For instance, if your financial system can provide clean and structured financial information, then it can be automated and streamlined with technology. This reduces the need to buy a new system while saving time and resources for training the employees on how the new system operates.
A gap analysis helps the business compare its current performance with its desired performance. This way you can examine the current state of financial systems, their functions, and align them to business goals and objectives. This process will help reveal areas of improvement across the processes and systems.
For instance, a gap analysis of financial information can improve future financial planning by informing stakeholders about the pitfalls of the current financial strategy. Similarly, you can conduct a gap analysis of accounts receivable systems and procedures.
Doing so would help identify the issues around tracking received payments, accurate customer invoicing, or data processing.
Once you know the drawbacks of your current financial processes, you can implement the correct procedures, policies, and systems to achieve successful business outcomes.
Accelerated Growth partners with entrepreneurial companies to assist in financial planning, budgeting, and systems evaluations. We can assess your current budgeting and forecasting methods and tools, and we can help develop your plan for the coming year.
Contact us for a free consultation.
Bobby Achettu is the founder and CEO of Accelerated Growth (AG) and has led the firm to 4 consecutive appearances on the Inc. 5000 list. Prior to founding AG, Bobby held several leadership roles, including at a Chicago-based private equity firm and within the strategy consulting practice of PwC. Bobby currently leads two nonprofit boards as co-chair of the Employer Advisory Board within Northwestern University’s Weinberg College of Arts & Sciences and as president of the Chicago chapter of the Entrepreneurs’ Organization. In addition, Bobby is an adjunct professor at both Northwestern and Loyola universities where he teaches on the evolution of modern business and social entrepreneurship.