Streamlining Financial Processes for Growth

A finance department often feels the pressure when a business is experiencing rapid growth, and it can be tempting to hire more staff as a quick and easy fix. In reality, this often fails to address the underlying inefficiencies of a company’s financial processes and can easily lead to a cash flow crisis.

Hiring is also expensive and time-consuming. Employees need to be recruited, onboarded, and trained, and if they turn out not to be the right fit, the organisation has to repeat the process again and again. For large and small businesses alike, this can significantly hinder productivity and cause an imbalance in cash flow.  

Here’s some advice on streamlining financial processes to cope with periods of fast expansion and enable further business growth. 

Finance requires a fine balance 

Finance departments are ultimately responsible for the cash flow of the entire organisation. They monitor all incomings and outgoings, which for a stable and consistent business is usually simple enough. However, in periods of rapid growth, the quantity and value of invoices will increase. Businesses may not be aware of these changes until the invoices have already arrived, and they will not be reflected in accounting and cash flow until they’ve been captured, processed, approved, and posted.

An increase in invoices leads to increased pressure on the finance team. Getting the new higher volume of invoices into the accounts system becomes the priority – cutting the time usually spent on other important tasks. More invoices mean that the team will also begin to receive more queries, whether from budget holders in the organisation or suppliers who require payment. The finance team will take an increasing amount of time to respond, and eventually, other departments may simply stop asking finance teams for approval or advice as they lose faith in getting a response. 

This can create a “better to ask forgiveness than permission” culture, adding more dangerous instability to an already taxed department. If the finance team only discovers a new expense within a few days of the invoice being due, they are not staying ahead of the game. 

Without accurate and early information, the department cannot best serve a growing company’s needs. Many leaders assume that hiring more staff will solve this problem, but they fail to see the root of the issue. By this point, the process has been broken. Additional capacity and team members will only replicate a cycle that endangers the stability of the business. 

Supplier relationships at risk 

When finance departments begin to struggle, relationships with suppliers often break down. As cash flow tightens, finance teams push supplier payments, as attempting to renegotiate the terms often feels like the easiest option. Unsurprisingly, most suppliers do not relish extending payment dates because it increases their financial risk. Clients that cannot pay on time begin to be viewed with distrust and subsequently receive tighter credit limits and harsh payment terms. If this happens to a critical relationship, the impact could be felt throughout the entire business. 

The easiest way to maintain a healthy relationship with suppliers is to pay them on time. Better yet, spend more money while continuing to pay on time. If a company can do that, they are in a more powerful position to positively affect the terms of the contract when negotiating new pricing or delivery terms. This is impossible when a finance team is burdened to the point of consistently failing to send payments on time. 

Areas to address 

The first step of streamlining financial processes is to transfer more responsibility and accountability to budget holders outside of the finance department. The best way to do this is to automate the purchasing process. 

When budget holders and senior leadership have a real-time view of cash flow and there is more financial transparency, they can better allocate their departmental or project budgets and resources. Whenever they need to buy something or bring in another resource, they will know exactly what effect that has on the entire system. This is far better than merely requesting funds on demand from the finance department. They are now empowered to plan and manage their own spending because they have been provided with the tools to achieve this. The company will experience cost and time savings in every department, and accountability for spending decisions will increase too. 

Education is key to achieving this. Senior staff should understand what a necessary monetary commitment is and what it isn’t. Setting guidelines for spending, along with having rigorous real-time controls in place, will give the finance team time to handle the other duties and keep operations running smoothly. 

Another important step is to eliminate paper invoices. A detailed and digital view of all cash commitments means that supplier payments can be approved and sent quickly. The quicker suppliers receive these payments, the more positive the relationship will be. 

Support sustainable growth 

In finance departments, hiring more team members without automating or making any other changes to improve productivity will negatively impact the business at large. While growth and expansion should be part of any company’s plans, it must be done conscientiously and with a long-term strategy in mind. The first step should always be to invest in current resources, increasing their efficiency and productivity, rather than making a department more complicated or doubling down on sub-optimal processes. 

Hiring and management strategies need to be future-proof. To protect your company and finance team, it is better to focus on effective delegation and implementation of new technology over making new hires. 

About the Author

Neil Robertson is CEO of Compleat Software. A 39-year veteran of the financial software marketplace, Neil has a long track record of building disruptive startups into successful businesses, including his time as CEO EMEA of Great Plains where he built the business outside of the USA from 1995 - 2001.