The Role of a Strong Accounting and Finance Team in Seeking Capital

What is a finance team?

A finance team is a department within your organization that handles all functions related to your company’s financial well-being. Generally, a finance team is responsible for a variety of tasks ― including accounting, recordkeeping, administrative work and cash flow. A finance team is also in charge of all duties related to your organization’s capital funds, including acquiring and managing these funds. Often overlooked, the finance team has the knowledge to teach you how to effectively grow your business.

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Roles and responsibilities of a finance department

A finance department is a group of teams, with each one handling a different aspect of your organization’s funding. Here’s a list of what a finance team can do for your business:

• Forecast your future budget: A finance team can review your budget and provide vital feedback on future expansion necessary to maintain efficiency. Based on this information, you can prepare for major costs well in advance.
• Make long-term investments: A finance team can also serve as an advisory board regarding the best routes for high-profit margins. This includes locating reliable sources for funds to grow your organization and issuing shares to company investors.
• Pay taxes: Every organization is required to pay taxes and this is the responsibility of the finance team. They can also build and maintain strong relationships with government entities ― a great way to stay abreast of any legal changes that impact your industry.
• Create budgets: A finance team would partner with your company’s leaders to determine a realistic budget. They would also tell you how spending would impact the long-term success of your business, based on patterns they’ve recorded from the organization’s transactions.
• Organize the books: Bookkeeping is one of the main responsibilities of the finance team. This means recording your business’s daily transactions, such as sales and expenses. The bookkeeper should also be prepared to explain these when necessary.
• Analyze data: The finance team analyzes your accounting data and uses it to create comprehensive statements. These are used to measure your business’s growth on a regular basis and they’re a great way for managers to keep track of key funding sources.
• Track cash flow: The finance team maintains all cash flow statements. These records detail transactions with vendors and creditors and respective payment dates. The finance team’s cash flow records are also used to ensure funds are available for daily operations.
• Advise leaders: Information gathered by the finance team is a reliable source for you and your managers when you’re making strategic decisions. The finance team advises leaders on which projects to undertake, how much of your business’s earnings should be distributed as dividends and which markets to pursue.

The finance team plays a crucial role in any organization’s success. Regardless of how small your business is, this is one department that you shouldn’t wait to add to your company. A good finance team can create a map leading to major profits.

Importance of a strong finance team

A strong finance team can grow your company in ways you’ve never imagined. Here are some ways that they play a big role in your business success.

Using detailed financials to inform the big picture

While you may know the direction you want your business to go in the future, a finance team has the expertise to break that long-term vision down into practical steps with a realistic timeline. They use detailed, current analytics of your business to provide your leadership team with a much more intricate overview than the standard ones many small businesses rely upon. A sharp finance team can spot potential problem areas so they can be corrected before they significantly impact the bottom line. 

For example, let’s say that your sales have been steady but an astute chief financial officer notices that the percentage of sales from existing customers has fallen. Even though the company has been able to replace repeat sales with sales from new customers, this signals a problem in either product quality, price or customer service. Once the issue is fixed, the company can benefit from increased sales revenue from both new and existing customers.

Knowing when outside capital is needed for growth

Standard financial statements prepared by your bookkeeping team or outside accountant will tell you if you need a capital infusion to smooth over a cash flow shortfall. However, it usually takes an inside financial expert to identify when additional funding sources are needed for growth. Your financial whiz can also tell you how much you realistically need, controlling your finance costs and enabling a successful growth initiative.

Identifying cost savings to boost profits

In-house finance teams are constantly looking for ways to improve profits. For example, they may analyze your raw material costs and find a way to boost cash flow by negotiating suppliers’ credit terms or they may recommend eliminating an employee benefit that is rarely utilized. 

Signaling responsible financial governance

Having a talented finance team in place lets others know that you are proactive about responsibly managing your money. Showing that you are serious about your company’s finances is important in attracting investors, getting approved by lenders and obtaining favorable terms from vendors on leased equipment and payment terms.

Allowing founders to focus on core competencies

Unless you founded a finance-related company, your passion and area of expertise probably don’t revolve around money management. The addition of an experienced and honest finance team takes that responsibility off your plate, other than final discussions, reviews and approvals. This gives you the ability to concentrate your time and effort on the company’s core business, establishing a positive and productive company culture and any other areas in which you have expertise. 

This is why it’s so important to create a strong finance team ― made up of more than only an accountant. It should include a cluster of experts who are not only familiar with the legalities of your industry but have interpersonal skills to explain the analytics to your management team.

How a finance team improves lending chances

Credit lenders across the board rely heavily on your company’s financial reporting abilities when considering your loan application. Consequently, the quality of your accounting and finance units is important as are accurate financial statements. With better reporting and a strong finance team comes a higher possibility of financing options. [Are you looking for funding for your business? Check out our picks for the best small business loans and financing options.]

However, if the financial data you provide has many holes in it, took months to procure or doesn’t reconcile, the likelihood of finding a willing lender will be low. There are options, such as invoice financing and a business equipment loan, which can still provide the capital solutions you need, but they may come at a much higher cost. There are times when new top accounting software is necessary. However, there are other times when hiring an experienced controller is worth the investment.

The most important approach is to have self-awareness and transparency to determine if you’re investing appropriately in this crucial part of your business. This decision has ripple effects on your profitability, your ability to borrow money and your daily stress level. While you may find yourself preoccupied with the big picture, remember it’s the small things that will get you there and a good finance team always has its eyes on the details.

Dachondra Cason and Matthew G. contributed to this article.