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What to expect from my Finance Department?
When you are running a business it’s very important to understand not just what you specialise in but also a bit about other areas of your business that will play a crucial role in running and development of your business.
I like to divide business into three main areas.
A) The Services you provide e.g. solicitor provides legal services, restaurant provides food, bookshop sells books etc. This is a department you specialise in and what people pay you money for.
B) The Sales & Marketing- unless you regularly market your business you will not get new or repeat business. A crucial support department for growth and success of any business.
C) The Finance & Admin department- this is a department that needs to keep up with the other two.
If your house is not in order anything that can go wrong will go wrong. This department is the most neglected one and a cause of number of issues on a regular basis.
So in terms of how a Finance Department functions and supports a business, it should do the following:
1. Have a system of acquiring information and filing back up documents.
2. Raise Sales Invoices to clients/customers and chase for payments.
3. Update client and supplier records
4. System of recording Supplier invoices. It’s not just any invoice received. They should know what to expect and chase supplier if need be. Otherwise, you could be overstating the profits.
5. Reconcile Bank transactions
6. Develop appropriate nominal accounts helpful for Profit & Loss and balance sheet reporting
7. Be on top of the compliance work around VAT, PAYE and other Companies House and HMRC requirements.
8. Ensure Recording systems does not have loss of man hours, avoid duplication of tasks and be systematic in saving time.
9. Understand business enough to develop helpful financial analysis reports. Return On Investments, Return on Capital employed, Costs vs Benefits, 80:20 analysis, expansion and financing options, Cash flow and Budget, dividend decision, working capital requirement etc. etc.
10. Timing advise – on spends that will help reduce the tax liability. Every profit in business has a 20% tax cost (assuming they’re small).
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