4 ways to save time and money with better financial processes
As the leader of a company, 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.
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, BDC Business Advisor Christopher Chan says your first step should be to get a clear understanding of how things are currently being done in your company. To do so, you or someone you trust should interview and observe how tasks are 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 improvements may exist.
“What are the processes today? How can we improve those processes, especially those that are posing a challenge to our operations?” Chan asks. “The goal is to make them more efficient and more effective.”
Chan, who helps businesses in the Montreal area improve their financial management, offers these tips on improving your financial processes.
1. Systematize relationships with customers
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, to issuing invoices and collecting payment. Therefore, it’s important to map every step and search for ways to improve.
“A very typical example is invoices not being paid because the company is not doing follow-up consistently on late payments,” Chan says. “Setting up automatic reminders enables you to follow-up with your customers, to apply late payment charges, etc. Otherwise, collections simply drag on and on and you don’t have enough capital to keep your operations afloat.”
2. Digitize your purchasing
Mapping your processes for purchasing supplies—from ordering, to receiving, to managing inventory and paying invoices—will often reveal many opportunities to save money and improve reporting to management. Furthermore, automation of certain tasks using digital tools will help your finance team to better track purchase orders, monitor inventory levels, make payments and generate timely reports.
“When tasks are automated, there is less room for error when information needs to travel between departments.” Chan says. “That reduces the number of errors and speeds up the entire process.”
Even simple process improvements can make huge differences, he says. For example, introducing a dropdown menu of items in inventory for employees to choose from, as opposed to manual entry, can prevent errors in data entry that require hours of time to rectify.
3. Ensure you get the right numbers
Throughout your business, accurate and timely data collection is a prerequisite for generating high-quality reports that management can use to make financial, operational and strategic decisions.
That’s why it’s essential to map your processes for recording and validating financial and operational data.
Chan cautions that recording data and creating reports depends highly on employees entering accurate information and processing it on time.
But as you map your processes and identify areas for improvement, it might be challenging to get employees to accept change. Training, constant communication and performance monitoring can help you get over this hurdle.
“Some people say: ‘Hey I’ve been doing it the same way for so long and it’s been working for me. I don’t really see why we should do it differently,” Chan says. “What they don’t realize is it’s not working for the rest of the organization. Reviewing your processes today is therefore very important in order to determine which specific tasks require improvements.”
4. Focus on financial controls
Chan says it’s also important to assess the effectiveness of financial controls throughout your business to prevent errors, waste and fraud.
For example, what is the process for authorizing purchase orders? What is it for receiving and shipping stock on your loading dock?
“Is there anyone who’s actually checking that shipments match purchase orders Chan asks.
It takes effort and investments to optimize your processes, but Chan says the cost savings and enhanced control over the business is worth it.
“You eliminate waste and errors and improve the flow of information. That means an entrepreneur can make decisions a lot faster to be ready for the next month or the next quarter and become more profitable.”