As a business owner, you have to make sure you’re paying the bills, investing for the future and turning a healthy profit. And efficiently keeping track of it all will only become more difficult as your business grows. The key is to map your processes to uncover waste and opportunities for improvement.
Having efficient financial processes will help streamline activities within your company while giving you the critical information you need, when you need it. In addition, having good safeguards and control is essential to mitigate risk, such as overpaying suppliers, fraud, and underpricing.
To optimize your financial processes, your first step should be to get a clear understanding of how things are currently being done in your company. To do so, you should review how tasks are currently being performed with the goal of identifying duplication and error prone activities, and determining how long these tasks take to complete. Consequently, mapping out your processes helps analyze where opportunities for improvement may exist.
Consider questions like: What are the processes today? How can you improve these processes, especially ones that are posing a challenge to your operations? The goal is to make them more efficient and more effective.
Here are a few tips to improve your financial processes:
1. Create a system for sales cycle
Entering and fulfilling orders efficiently and accurately as well as getting paid quickly are critical for maintaining good cash flow, keeping customers satisfied and generating the financial information you need.
Delays and errors can crop up at any point: From order entry, to fulfillment, to shipping (if you are in the business of selling goods), to issuing invoices and collecting payment. Therefore, it’s important to map every step and search for ways to improve.
A very common example is invoices not being paid because the company is not doing follow-up consistently on late payments. By setting up automatic reminder, it enables you to follow-up with your customers and apply late payment charges. Otherwise, collections simply drag on and on and you don’t have enough capital to keep your operations afloat.
2. Standardize business purchases
Mapping your processes for business purchases—from ordering, to receiving, to managing inventory (again if you are in the business of selling goods) and paying invoices—will often reveal many opportunities to save money and improve efficiency. Furthermore, automation of certain tasks using cloud applications will help you better track purchase orders, monitor inventory levels, make payments and generate timely reports. Consider using Hubdoc to enter bills, Quickbooks Online to monitor accounts payable, DEAR Systems to manage inventory, and Zapier to automate other tasks.
When tasks are automated, it reduces the number of errors and speeds up the entire process.
3. Having accurate financial data is crucial
Throughout your business, accurate and timely data collection is a prerequisite for generating high-quality reports that you can use to make financial, operational and strategic decisions. A general rule of thumb is to review your monthly financial statements by the 15th of the following month to make timely business decisions.
That’s why it’s essential to map your processes for recording and validating financial and operational data. This depends highly on you entering accurate information and processing it on time.
As you map your processes and identify areas for improvement, it might be challenging to embrace change at first. You might feel that you’ve been doing it the same way for so long and you don’t see why you should do it differently. But there’s always a better way of doing things, and it could have a significant impact on your operational efficiency.
4. Review the financial controls
It’s also important to assess the effectiveness of financial controls throughout your business to prevent errors and waste. For example, what is the process for authorizing business purchases? What is the process of approving discounts in your sales cycle?
It takes effort and investments to optimize your processes, but the cost savings and enhanced control over the business is worth it.
You can eliminate waste and errors and improve the flow of information. That means you can make decisions a lot faster to be ready for the next month or the next quarter and become more profitable.