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Creating a Path to Growth through Financial Operations

March 11, 2020

The operations of an organization are constantly in flux. By their very nature, these operational shifts make it virtually impossible to maintain a consistent level of business success. Internal changes such as personnel leaving or loss of a lease can affect the organization’s ability to produce. External influences such as competition, changes in costs, or inconsistent performance by vendors also create issues with efficiencies. Many of these variables are subtle and difficult to track. In many respects, therefore, the Finance department is an organization’s ultimate scorekeeper.

By tracking sales volumes and corresponding costs, we know whether our business is growing or contracting. Watching employment costs and overhead helps us realize the nuances that drive efficiencies in operations. In a word, numbers matter. Unfortunately, many organizations do not fully understand how much finance can contribute to the organization’s success.

Many managers only think in terms of the basic financial functions they see on paper — financial reports. They don’t realize the expanded activities of a fully operational finance department. Just as an organization must have a variety of management layers, a finance department has several functional layers. The following are a few of the important roles that many organizations miss.

Clerks or Bookkeepers

Many organizations hire a bookkeeper to take care of all their money issues in their start-up phase. The bookkeeper is relied upon to record the daily transactions of the business. They may take the function as far as creating Profit and Loss reports, but generally stop here. While they may be very accurate, bookkeepers may not have any oversight, allowing errors to creep in. They can tell the owner what is in the bank, but seldom prepare budgets, projections or warnings regarding anomalies that have occurred.

Controllers or Accounting Managers

As the business grows, the need for leadership within the accounting function will develop. The controller is tasked with managing the finance function. She will review the accounts for accuracy and perform the more sensitive functions of treasury. The controller will often initiate budgets and prepare full financial statements periodically. The position is essential as the business grows and requires more oversight.

Chief Financial Officer

The C-level team requires a peer from the finance team who understands the strategic nature of the business. The CFO understands the accounting and treasury functions and how they affect the strategies required to achieve the vision of leadership. By analyzing historical information and projecting the effects of changes in strategy, the CFO brings critical information to the C-suite, allowing for the best decisions.

Expand Finance as the Organization Grows

Of course, this is only a narrow summary of the accounting department. Larger organizations will have more layers and spread tasks to very specific specialties such as internal auditors or tax specialists. While small and medium businesses may not be able to afford every position described, they need access to the functions. This can be accomplished through selection of appropriate board members or outside professionals. Outsourcing allows the organization to acquire the appropriate level of expertise. Having the right financial skills onboard will allow a path to growth.

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