Kickstart the New Year

Kickstart the New Year: Finance Function Reset for your Business

January is the perfect time to step back, clear your head, and set a stronger course for your finance function. Most businesses slow down over the festive period, which creates some breathing space to start back in January with a clear head.

Numbers affect and report on every part of your business. They show how you are performing, warn of issues before they hit and tell you whether you can meet your commitments. They can tell you if your clients are staying, if pricing is keeping pace with rising costs and much more. If your finance function isn’t working well, you could be missing insights that would drive decisions and changes. It’s important to keep reviewing your finance function because what worked last year, might not be so appropriate for the year ahead. So take the time to review and make sure it fits your plans for this year. Here’s a simple framework to review last year, set goals for this year, and turn them into an actionable plan that gives you clarity, control, and results.

Step 1: Block out Time to Plan

Book time in your diary. This could be one hour or one day, but however long you set aside, treat it like any other high-priority meeting. Consider your business as your highest paying client and the time you spend planning will reward you over time in improved performance, results and clarity of thought.

Step 2: Review prior year through 3 lenses - Data → Process → Results

Ask yourself:

Data:

• Did you have the numbers you needed and could you trust them?
• Were any key measures missing? Consider things like:
  • Profitability per client or service line
  • Number of clients and how reliant you are on one big one
  • How fast invoices were paid (and how much of your time is spent chasing those payments)
  • Fee-earner utilisation
  • Cash flow forecast

Process:

• Were month-end numbers ready quickly enough to act on?
• Were they clear and easy to understand?
• Are there clear processes for credit control, cash flow management, budgeting and forecasting?
• Were you doing tasks you shouldn’t be doing?

Results:

• Did you meet the targets you set or did you not set any?
• Were those targets clear or did they move as the year progressed?
• What is your definition of success (e.g. growth, margin, cash stability) and did the results reflect it?

Tip: if you struggle to define success, answer the question “what would make you close the business?” Lack of cash? Low profit?

Step 3: Set SMART goals

Use the same three categories to build Specific, Measurable, Achievable, Relevant, Time-bound goals.

Data Goals

• Decide how often you want to see numbers
• Do you want to see full monthly management accounts with commentary and a meeting with your Finance Director or would you rather receive a simple dashboard with a quarterly meeting?
• Define the KPIs that are important to your business e.g. client profitability, debtor days, utilisation, pipeline vs. capacity.
• Keep it simple, don’t drown in every single metric you can report on as irrelevant KPIs will be a distraction and waste time in production.

Process Goals

• Decide what to keep, change, or stop. Analyse the product of and reason behind the process to understand it’s value.
• Remove all tasks that are duplicative, automate where possible and always add checks to ensure the results are correct.
• Example goals:
  • Implement standard monthly management accounts close process
  • Circulate management accounts by working day 5
  • Automate chasing invoices at 7/14/21 days
  • Update 13-week cash flow weekly
  • Produce rolling 12-month forecast monthly

Results Goals

• Big ambitions are great - doubling turnover, for instance - but ensure that while they’re challenging, they’re still realistic
• How will you get there? Sell more? Raise prices? Do you have the capacity or will you need to recruit? If the latter, don’t forget to add in extra costs as you scale

Step 4: Turn Goals into an Action Plan

Technology

Do you need new software? Training? Can existing systems be linked together?

People

Do you have the right people in the right roles? Are roles clearly defined and are there any bottlenecks from key people that need to be removed?

Pricing

Do you want to introduce fixed fees, retainers or adjust rates?

Reporting

Do you need to change the frequency and quality of finance packs so leadership can act appropriately? Keep in mind that sometimes reducing frequency or volume of data is the way to go.

Step 5: Build a 12-Month Budget

Create a clear budget that reflects your strategy and track it against rolling forecasts.

What a Great Finance Function Looks Like

Clear, repeatable processes

Numbers are produced efficiently and accurately every month.

Takes the small stuff off your plate

No more chasing invoices or fiddling with reconciliations. Finance handles the admin efficiently so you can focus on growth.

Strategic partnership

Beyond reporting, finance acts as a trusted adviser, providing analysis, commentary and real insight into what the numbers mean and what to do next.

Forward-looking

Finance shows exactly where your business stands and whether you’re on track to hit your goals.

Cash under control

Cash flow is managed proactively to maintain stability and support your growth.

Ready to make this year your strongest yet?

If you want clarity and momentum, Superstar FD can take finance off your plate. From day-to-day operations to goal setting, budgeting and improving profitability and cash flow, you can focus on growth while we handle the numbers. Get in touch today to see how we can support your plans for the year ahead.