Technology
Business
Finance
Accounting
Tax
Risk
Small Business Management
Capital Markets
Accounts Payable/Receivable
Treasury
"How do I know if my Finance team is doing a good job? I'm not an accountant"
If you're an SMB owner, operator or investor, this thread is for you
Here is exactly how to evaluate, prioritise and start improving your Finance processes on day 1
let's dive in
๐งต ๐
If you're an SMB owner, operator or investor, this thread is for you
Here is exactly how to evaluate, prioritise and start improving your Finance processes on day 1
let's dive in
๐งต ๐
firstly, finance is not whatever this is
I have no idea what this machine does -- if you do, plz DM me and it'll count towards my CPD hours for the year
I have no idea what this machine does -- if you do, plz DM me and it'll count towards my CPD hours for the year
In big corporates you'll see these 7 functions in Finance:
โข Accounting
โข Financial Planning and Analysis
โข Accounts Payable/Receivable
โข Capital Markets
โข Treasury
โข Tax
โข Risk
Here's a little more about each function:
โข Accounting
โข Financial Planning and Analysis
โข Accounts Payable/Receivable
โข Capital Markets
โข Treasury
โข Tax
โข Risk
Here's a little more about each function:
If that sounds complex, good news: you don't need all those in your SMB.
You can simplify that down to your 4 main priorities, in this order:
You can simplify that down to your 4 main priorities, in this order:
Firstly, don't run out of cash, break the law, or get sued or defrauded out of existence. (*cough* Enron)
Second, increase bottom line profits.
Third, look after your company's assets.
and fourth, reinvest your profits to grow
Second, increase bottom line profits.
Third, look after your company's assets.
and fourth, reinvest your profits to grow
Step 1 is far and away the most important.
Your finance processes are like a pyramid. You must get the foundations right first, otherwise you're building your house on quicksand
Those foundations are paying suppliers, paying payroll, collecting cash, accurate books
Your finance processes are like a pyramid. You must get the foundations right first, otherwise you're building your house on quicksand
Those foundations are paying suppliers, paying payroll, collecting cash, accurate books
To illustrate this here's a nice diagram I borrowed from a previous CFO I worked for.
Any improvements you make must start at the foundation layer of the pyramid
and you can only ascend to the next layer once you've buttoned down everything below
Any improvements you make must start at the foundation layer of the pyramid
and you can only ascend to the next layer once you've buttoned down everything below
e.g. once you're sure you're not going to run out of money tomorrow, or your staff won't walk out bc they're not being paid, then you can start thinking about your reporting.
Once your reporting is solid, you can think about forecasting
and so on, up the pyramid
Once your reporting is solid, you can think about forecasting
and so on, up the pyramid
If you're new to a company and want to quickly evaluate how well your finance function is performing, start with this checklist:
1) how do we control who has access to the bank account & who can make what payments?
2) how do we make sure we're getting paid on time by customers?
1) how do we control who has access to the bank account & who can make what payments?
2) how do we make sure we're getting paid on time by customers?
3) how do we ensure staff are getting paid correctly and on time?
4) how do we authorize vendor invoices?
5) how do we make sure the team can claim fair and reasonable expenses? (no more, no less)
6) how do we review our financial performance? What cadence, KPIs, and so on
4) how do we authorize vendor invoices?
5) how do we make sure the team can claim fair and reasonable expenses? (no more, no less)
6) how do we review our financial performance? What cadence, KPIs, and so on
7) how do we budget and forecast for the future, and measure performance against that forecast?
Here's more detail -- again, only move onto the next step when you're sure the step above is dialed in, otherwise you're trying to run before you can walk
Here's more detail -- again, only move onto the next step when you're sure the step above is dialed in, otherwise you're trying to run before you can walk
You might notice that this starts with the bottom layer of the pyramid, and slowly ascends from there. That's on purpose.
If you follow these steps, in that order, you're well on the way to having a solid, controlled, profitable business supported by a slick Finance team.
If you follow these steps, in that order, you're well on the way to having a solid, controlled, profitable business supported by a slick Finance team.
Then you can get into the sexy stuff like M&A, raising equity or debt, strategic long-term changes, implementing new ERP systems.
That's all the great value-add stuff, but trying to do that on top of shitty data and processes is like trying to tango with a giraffe.
That's all the great value-add stuff, but trying to do that on top of shitty data and processes is like trying to tango with a giraffe.
You might be able to make it work for a short burst but you have no hope of long-term success.
If instead you're building on top of solid foundations, you're gonna have a good time.
(yes I'm mixing metaphors, I'm an accountant, not a writer)
If instead you're building on top of solid foundations, you're gonna have a good time.
(yes I'm mixing metaphors, I'm an accountant, not a writer)
if you want more help to do this in your SMB, you might need a fractional CFO. There are a few great ones here on twitter:
@connorabene
@RyanLHolden
@AliTheCFO
@Agency_CFO
@kinjalaamin
@connorabene
@RyanLHolden
@AliTheCFO
@Agency_CFO
@kinjalaamin
and follow people like @SecretCFO and @smbcfo who also put out great content from their years of experience.
You can learn TONS from twitter if you use it correctly
You can learn TONS from twitter if you use it correctly
@SecretCFO @smbcfo That's a wrap!
If you enjoyed this thread:
1. Follow me @andrewglynch for more of these
2. RT the tweet below to share this thread with your audience
If you enjoyed this thread:
1. Follow me @andrewglynch for more of these
2. RT the tweet below to share this thread with your audience
@SecretCFO @smbcfo Lastly if you want me to send you the slide deck I created that includes all the info in this thread, reply with the moneybag emoji below, and I'll DM it straight to you
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