Small business owners often find themselves wearing all the hats in their business, juggling daily tasks that range from sales through to purchasing and daily finance operations. The problem is that if you want to grow your business intentionally, the ‘I’ll oversee everything myself’ model is simply not sustainable.
The internal finance function in your business is its lifeblood. If it’s not running smoothly then your business can’t run smoothly. Small business owners understand this instinctively, and so it’s often the case that they are reluctant to relinquish control over this area.
Investing in finance personnel and systems ultimately yields bottom-line results, but only if you know how to build a team around a finance function that can manage workflows and processes efficiently. In this post, we’ll show you how to build an internal finance team that doesn’t need you. When you have an internal finance function that runs like clockwork, you’ll be free to make great operational decisions with confidence.
What Exactly is your Internal Finance Function?
Your internal finance function is not to be confused with your accounting or auditing function. On the flip-side, many small business owners make the mistake of assuming that the internal finance function relates solely to daily transaction processing. Your internal finance function should consist of three major activities:
- Transaction Processing (allocating and recording daily financial data)
- Monitoring & Controls (implementing controls and managing risk within your systems)
- Reporting & Insights (using your financial data to gain insights into your business and continuously improving your finance function so that it supports you in making operational decisions that add value to your organisation)
Each of these categories involves different types of daily, weekly, and monthly bookkeeping and strategy tasks, all of which make up your internal finance function.
What Does Your Internal Finance Team Do?
In order to build an efficient team (even a team of one), it’s essential that you know exactly what type of work they need to perform. Your internal finance team undertakes 3 types of work, regardless of the size of your business:
- Firefighting
Tasks that are urgent but not planned for. These issues are high priority and take preference over the daily to-do list. An example is a customer invoice query that requires instant attention. If it’s not resolved, there are serious consequences, like poor cash flow or loss of sales.
“Firefighting is both urgent and important. It shouldn’t be confused with non-critical work that procrastinators love such as answering general emails.”
- Standard Work
Standard work takes a fixed amount of time and resources to complete. It relates to critical daily tasks that have to be done on a daily, weekly, and monthly basis. Examples include invoicing, bank reconciliation, payroll, expenses, generating reports, and managing risk.
“Standard work suffers when firefighting increases because it gets deprioritised and delayed as resources are diverted”
- Project Work
In the case of your internal finance function, project work is usually a piece of work undertaken to either improve an existing process or implement a new one. Examples might include redesigning the motor and travel claims process, replacing an outdated accounting system, or digitising and automating a previously manual process.
“Big improvements come from project work but only if it’s actually completed. People get carried away with the latest and greatest software without making time to focus on correct implementation. Then the never-ending cycle of daily-tasks takes over and project work gets pushed aside.”
Build a Common Structure
Now that we know the types of work our finance team needs to perform, we need to create a common work structure. Without a common structure, it’s easy to get distracted and jump from one project or task to another. This then leads to problems that demand your attention:
- Projects end up over budget, unfinished, or not fit-for-purpose
- Standard work gets ignored or is inconsistent and unclear
- Firefighting continues to drain time and resource without any lessons learned
There are 3 things that we need to do in order to create a finance operation that is organized and under control with systemised workflows and processes:
1. Make a List of Standard Tasks
In order to maintain a healthy finance function, there are daily, weekly, and monthly tasks that need to be done. These are standard repetitive tasks that you currently do. The best way to document these tasks is by way of a humble checklist. This shouldn’t be a detailed how-to-guide of the steps needed to complete each task. It’s simply a list of your finance to-do’s.
Start with 2 standard task checklists: monthly and annual. Include blocks of time in which the tasks can be done, a column to take note of who is responsible for getting them done, and a checkbox so that everyone can see when the task is complete.
Over time, your checklists will evolve. Step-by-step instructions can be included which will allow for delegation and training. As tasks are reviewed each month, they will be improved or replaced. For now, just getting your standard task list documented is a great start.
2. Make a List of Key Processes
This sounds simple, but most small businesses neglect to do it because ‘everybody just knows what to do’. But mapping out your customer journey and listing associated business processes across the company will give you a ‘map’ that you can use to ensure that you’re always improving in the right direction. Once you have your key processes listed, you’ll be able to eliminate processes that are no longer required, evolve the remaining ones, and reduce your standard workload.
3. Review and diagnose Firefighting Issues
Firefighting issues are unique by nature but always require time, resources, and decision-making. It is important that these issues are reviewed on a regular basis so that your finance team can learn from them. If you seek to determine why and how these issues happened in the first place, you’ll likely unearth fundamental risk issues and oversight in a particular process, which can subsequently be fixed.
You’ll end up with a framework in place that will allow the office administrator to work through tasks efficiently. With a smooth-running finance function producing timely financial information, you’ll be free to make great operational decisions for your business.
At FinOps, we systemise and support your daily finance function. If you are looking for support and guidance with any daily finance tasks please feel free to contact us.
