Finance Function Part 1: Foundations
We offer a whole suite of services at Crews & co. If you didn’t know that, here’s a quick plug for our ability to help you with sales, marketing, executive coaching, recruiting, and HR along with our broader business consulting.
And finance. Finance services are the fastest-growing part of our business, and I believe there are two reasons for that:
- Our services are structured to make sense to entrepreneurs. I use my experience as a young entrepreneur as a baseline—and I didn’t know much at all—to help us develop services that are practical, useful, and valuable to business owners.
- Accurate financial insight can transform a business. Financials aren’t (just) read-outs of what happened in your business the previous month. They’re gold mines of information that you can, and should, use to make meaningful decisions about growing your company.
But before you get to the exciting stuff, the dashboards and the drivers and the rest of it, you have to do some important (if not exciting) foundational work.
Clean financials are critical to using finance as a lever in your business. Full stop. If your data is not accurate, it cannot help you make accurate decisions. You need books that are closed every month. Reporting on your company’s profit and loss, cash flows, and balance sheet. Plus a Rolling Income Statement, which shows you whether or not you’re on track to hit your numbers for the year, based on actual progress to date.
Any good bookkeeping resource can make that happen for you. If you don’t have a good resource, that’s the place to start.
The cadence for this reporting is monthly - not quarterly, not annually, not when your CPA gets around to it, which is always 3 months late during tax season. Monthly. You should set a clock by when you’ll receive your financial reporting.
…And by the way, receiving it does not mean a zip file sent to your email. Yes, you should have access to the reports themselves, but you need more context if you’re going to interpret the data successfully.
That’s where the Monthly Finance Meeting comes in.
This is a meeting with key members of your leadership team, led by your head of finance. The CEO is there as a participant, to receive information, ask questions, and make sure they understand the data.
The finance leader is there to walk the team through the data and, critically, to share the narrative. Every data set tells a story, and you need the story to help interpret the numbers.
Is that bump in revenue due to collecting from a late-paying client or because you’re closing more deals? Is an increased cost of labor a sign that the team isn’t working efficiently, or just a month with three payroll periods?
When you know what the numbers are telling you, you make better decisions.
Again, everything I’ve described here is the basics. It’s not the fun, sexy stuff that finance is capable of. But, and I cannot stress this enough, you cannot skip the basics. Every custom report, every profitability breakdown, every pie chart and graph you want to see depends on this information being available and accurate.
The basics are not necessarily easy. Our finance team often works with companies for several months to put these foundations in place. The business has to build the muscle of collecting and analyzing financial data before you start using it effectively.
How you use your financial data, and how it drives the business, will be the subject of my next post. Stay tuned, because it gets pretty exciting from here on out.
PS - I am extremely passionate about giving every business owner I work with the tools to have accurate and available financial information. But I still hold to the idea that you don’t have to put your business on pause while you do this cleanup work. Keep moving forward directionally in the meantime.
