What financial management processes do you need in place to scale up your business?

Many businesses hit a glass ceiling a couple of years into their existence. The problem isn’t necessarily that their product is no longer relevant or that their service isn’t required anymore. It’s more likely to be that the financial systems and processes they have combined with their financial leadership is not geared towards expansion. Scaling up your business requires different skills and knowledge to starting it up.

We’re going to look at some of the important financial management considerations you will need to implement in order to scale up your business but before we begin let’s get back to basics and establish what we really mean by ‘scale up’.

We use the term ‘scale up’ to refer to either an established business (or an offshoot business) with clear growth plans, or a start-up which has proven (or is close to proving) its business model. To demonstrate success, they are looking to drive results showing clear growth often over a short period of time.

Accelerated growth is a key feature of a scale up which means finding and managing funding, the timing and quantum of investments, working capital and cash-flow are critical to success.

It’s at this stage that clear strategic financial leadership comes into its own. Keeping a tight rein on costs while at the same time ensuring that investment in business-critical areas is generating suitable returns are an important, and tricky, balancing act.

Managing the cash and servicing the debt of a high growth business and making sure that the business is complying with the relevant financial covenants will be high on the ‘to do’ list for a scale up Finance Director and their finance team.The role of a Finance Director in a scale up business.

As a leader of a scale up business, you should expect your Finance Director to be a core member of your senior leadership team and to be by your side as you define and design your vision.

The relationship between a CEO and their FD is an important one and should be built on three key foundations:

  • Truth
  • Trust
  • Transparency

Regular interaction with all stakeholders is fundamental and good management of the communication and relationships with the key stakeholders is a must.

The core responsibility of your finance leader is robust financial stewardship. Clear and simple processes of financial control should be established, and these will be the cornerstone upon which financial leadership and subsequent reporting is built.Financial challenges to scaling up.

Change is often resisted and sometimes feared. A common challenge faced by a business wanting to scale up is the existing culture. Oftentimes, the business isn’t used to financial control, and a significant shift in “the way we do things” may be required. With sensitive but firm leadership a culture of accountability and drive towards success can become the norm in your business.

Selecting the best possible people and tools is key here, and the options will be different depending on the culture and business needs. Don’t forget to always keep an eye on future requirements – things change quickly in scale ups – nevertheless, my recommendation is to keep things as simple as possible without compromising on the quality of control.Take control as early as possible.

Achieving financial control early on in the growth journey will give good foundations for the business to thrive on. It is a key building block for success and leveraging the right tools at the right time will make a huge difference.

Building on your control processes, a quick, accurate & fuss free monthly close will build confidence in your finance team and the information they produce. This, and all other compliance and regulatory requirements should be a key deliverable for your finance team.Once the foundations of robust financial control are in place, what next?

Your FD should have a deep understanding of your business model, and he or she will help you to define the key measurements of success specific to your business and vision. These will include but won’t be limited to financial measurements.

In addition to giving an indication of progress, these measures also give senior leaders points of reference to help them to steer through often challenging circumstances. Regular reporting & help to interpret these measurements is important – an underspend versus budget is not always a good thing!

Having said that, turning the results into corrective decision making & action will be invaluable leadership support for you and your business.

Clear succinct reporting, with actionable outcomes will give clarity to the CEO, improving the quality of decision making, giving your business a better chance of success, and driving value from the finance team.Envisioning the future.

Your Finance Leader should have the skills to forecast financial results based on a number of key assumptions. They should also be able to build predictions based on a number of different scenarios. There are a number of forecasting tools available, and each should be assessed critically against the expected value add, however for me, two things stand out as important when committing to your forecast.

  1. Do the forecast results make sense?
    • It is always important, no matter how sophisticated your forecast model is, to stand back and ask yourself “Do the numbers make sense?” It can be very easy for a mistake in an assumption to make a big difference to your overall forecast.
  2. No Surprises
    • There should be no surprises if you understand the business well, and if you understand the effect of the key drivers on your results. This isn’t just a logical point borne out of modelling, a good finance partner builds strong relationships throughout the business and becomes an extra pair of eyes and ears for leadership helping them to really understand their business and what they need to do to be successful.

How The Smart Team helps businesses scale up.

The Smart Team was created to respond to the changing world for emerging and scale up businesses. We recognise that traditional management and finance structures simply don’t meet the flexibility and agility that new and scale up businesses need in order to grow and thrive in fiercely competitive world markets.

The Smart Team helps you grow your business with our flexible finance services that give you access to high calibre professionals when you need them. We embed seamlessly into your leadership team to drive value from the finance function. In short, we work ‘with you’ not simply ‘for you’.

Our services are both economical and bespoke – you only pay for the services you need. This means that you get access to experienced and highly skilled financial advice & services at an affordable price.

With our safe pair of hands your time is freed up to concentrate on building the business whilst we add value with a strategic finance focus that improves profitability. With our support you will gain a better understanding of the critical success factors, profit drivers and KPI’s that will lead to better informed decision making.

We work with businesses across Oxfordshire and the surrounding area to provide high performing, cost effective finance teams who are genuinely part of your business.

Why not get in touch for an initial chat about how we might be able to help?

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