Your financial department can make or break your company’s success. A financial department is vital because it records and manages all financial transactions of a company (e.g. bills, revenue, loans, assets). It forecasts expenses and revenues into the future to make sure a company always has enough cash on hand for day to day operations.
For smaller companies, a financial department may only be made up of one or two people who fulfill multiple roles. Larger companies will have more employees such as a CFO, controller(s), and accountant(s).
As a business owner, it’s important to keep in mind that your job doesn’t stop at simply hiring these employees. It is your responsibility to ensure your financial department is performing effectively and efficiently.
A few qualities are vital for your financial department. First, it should be accurate and consistent. Your financial team should be detail oriented and shouldn’t repeatedly miss things.
Second, your financial department should have the training and expertise necessary to fulfill the roles. Many companies hire someone who isn’t qualified (or promote someone in their business who doesn’t have the appropriate training). This leads to compliance and legal issues if your financial department doesn’t understand the risk and regulations specific to your industry and business location.
Finally (and maybe surprisingly), it is important for financial departments to be flexible. Financial departments are becoming more and more complex as time goes on and are using sophisticated technology. It is important for your team to be able to adapt to changes, utilize financial software, and learn new rules. They should understand that sometimes taking the long complex approach is not the right solution to an issue, because it will be extremely time-intensive and expensive for your company. There are often ways to efficiently fix accounting issues without going in and fixing every little detail.
But how do you know your team has these attributes if you don’t have a financial background? Here are some common issues I see when a financial department is not performing effectively: you get feedback from customers or vendors that a bill was missed, an invoice wasn’t paid, invoices get mixed up, or a bank doesn’t give you a loan because something doesn’t make sense in your financial statements. You may have an issue if your company regularly experiences missed financial deadlines, or if you notice things that don’t make sense and your financial department can’t explain it. If you are experiencing these issues, or if you aren’t sure if your department is performing how it should, you can contact Sentinel Finance Group to audit your financial department.
Sentinel Finance Group is an outsourced CFO firm in Kansas City and provides fractional CFO services and controller services to local businesses.
