How to build an effective finance function

There has been book after book written on how to build an effective finance function but here at Farnell Clarke, we believe every effective function needs the right blend of three key things:

• Software & systems
• Process
• People

Let’s look at these and their implications in turn.

Software/Systems:

The first thing is to choose a cloud accounting ledger such as Xero & Dext for purchase processing. When you implement systems like Xero it brings in disciplines and ways of working that may not have been followed but should be encouraged from day one.

An example on the sales ledger:

GETTING INVOICES OUT ASAP TO THE RIGHT CONTACT DETAILS = £ IN SOONER

As basic as it sounds; from being able to email invoices out to customers on time, having your bank details for payments showing on the invoices, to having your credit terms showing – these can be the difference between getting paid on time to meet payroll deadlines, to simply not.

Alongside Xero you can then introduce apps to streamline and automate other areas of the business. From integrating your EPOS, ecommerce, or project management tool for sales ledger to Dext with ApprovalMax and Telleroo for the purchase ledger.

By allowing the software to do the heavy lifting, focus can be given to things that give value to the business for reporting and analysis purposes.

Take the time to setup systems to ensure the right data will be possible to extract. Think about what Key Performance Indicators (KPS’s) will help you and the business and what information is needed to provide these. As a simple example, ensure your chart of accounts/tracking in Xero is setup to provide analysis on regional performance.

Processes

All processes should be documented and detailed with assignees identified for each step where possible.

When we have completed finance system transformation, we have asked for notes on current systems and processes, and 1 out of 5 businesses would be able to share this. This comes back to, why do we do it this way? If there is no logical reason, then why keep doing it. With notes it means processes can be reviewed with a full understanding and changed if circumstances allow.

Having a good process also means that new team members can easily follow and understand what and why they are doing something. This could help with reduced training time.

Even the training can be put on amazing tools like Trainual for virtual learning or sharing them on an intranet as flowcharts is a great start.

Control and audit

We have seen time and again when businesses grow the lack of control over spending is also grows. It usually starts because there is a small team so everyone knows what everyone is doing but as soon as you hit that head count or multiple location this can be easily lost.

This can be reviewing credit card expenditure, signing off on invoices, approval against budget etc. See my blog about why we love ApprovalMax*

It is imperative that processes are in place to prevent fraud. This is not just from external threats but sadly ones that can occur internally. Examples where invoices have been doctored for change of bank details are not uncommon or unsolicited/phishing emails are actioned “requesting payments ASAP”!
If a process is followed that has been reviewed, then most risks can be reduced.

People

Match the skillsets to the task.  Ultimately there are many tasks that make up the entire finance process. It is key that the right person is assigned the right task to use their skillset appropriately.

Recruit the right people.  As a business owner you need to recruit based on skills but also someone you can work with. A key quality is communication; this could be to you as an individual business owner short of time, or a presentation to the board.

It might be that the bookkeeping tasks can be outsourced or automated as they are very process driven.

Qualification – I may be shot here but qualification is not everything; qualification by experience also counts. Just note though with governing bodies such as AAT/ACCA/ICAEW you know there is a governing body that an individual/organisation are part of.

Farnell Clarke has helped support many businesses review and rebuild their finance functions, systems, and processes. If this has made you think, why not contact us today to see how we can help you overcome them. Or, you can read one of our outsourcing case studies to see how we have helped other companies overcome similar challenges.