For the average small business, it’s common for the owner or principal to take responsibility for the company’s accounting needs.
At first, that makes good sense. When striving to get a new venture off the ground, resources are often limited, and there’s just no reason to go through the trouble or expense of hiring a dedicated employee to handle the company’s finances. As the operation grows, however, a day will come when the accounting needs of the business grow beyond the owner’s capabilities.
In truth, growing businesses will go through several distinct phases when it comes to their accounting needs and practices. Knowing what they are and what kind of staff is required at any given point is vital to ensuring the proper operation of the business and to avoid any unpleasant financial surprises.
To help businesses of all sizes make these all-important staffing decisions, here’s a guide to the different phases in the financial life of a growing business after the owner-accountant beginnings and who they’ll need to manage them.
The Bookkeeper Phase
A survey of small business owners revealed that 58% of those putting in 60 or more hours per week named bookkeeping as their most draining task. That alone is enough to illustrate exactly when it’s the right time for the owner to turn over control of the company’s books to a dedicated employee. For the most part, this is when a small business should take on a bookkeeper on a part-time or full-time basis, as needed.
The bookkeeper will function as something of a financial recorder, leaving the financial strategy still under the owner’s control. They will, however, bring knowledge which will help the business in the following areas:
- Payroll, tax withholding, and insurance
- Monitoring monthly costs and avoiding unnecessary expenditures
- Keeping all accounts payable up to date
- Preparing tax forms and making required payments to relevant tax authorities
Generally speaking, a business will need a bookkeeper once they have completed a full year of operations. If the business expands quickly right after launch, however, that time could be cut down significantly.
Another thing that could save time in bookkeeping is automating currency transaction reports and filing. Experts at NICE Actimize say that firms with outdated systems and labor-intensive processes are unable to act quickly and accurately report on issues, facing fines and reputational damage for non-compliance. By using software to track exchange rates and automatically generate reports, businesses can avoid the need to manually update their records and reduce the chances of human error.
The Controller Phase
The next financial phase that a typical business will enter happens when the owner no longer has the time or the expertise to remain the sole financial decision-maker for the business. At that point, it’s customary to expand the company’s accounting staff to offload the work. The expansion normally includes a dedicated employee that handles accounts payable, another for accounts receivable, and a manager for the department, known as a controller. A controller takes on the role of managing the accounting staff, but also provides insight and analysis of the company’s finances to management, including the owner.
They’ll also institute inventory controls and conduct internal control audits to prevent fraud, theft, and other malfeasance.
A typical controller will have around ten years of professional experience and hold a Bachelor’s degree in business management or accounting. They are also often one of the first managerial hires of a growing company.
You may also want the experience of a qualified CPA to perform a financial audit and other assurance services. It’s prudent to hire a CPA for this because they follow a particular code of ethical standards.
The CFO Phase
The final evolution of a typical business’s financial operations comes when they’ve grown to a point that they require a dedicated professional to construct a forward-looking financial strategy to carry the organization to the next level of success. That person is known as a Chief Financial Officer (CFO). Once hired, the CFO assumes responsibility for all aspects of the company’s financial dealings, reporting to the owner, CEO, or board of directors, depending on the structure of the business.
Their job extends well beyond that, however. A CFO also has a direct say in the operation of the business, having veto power overall expenditures. According to Novo Executive Search and Selection, it’s also a role that has evolved significantly in recent years, with a shift from a traditional budgeter and forecaster, to that of a strategic leader.
For example, the remit of many CFO roles has grown to include having an understanding of the latest in fintech and a wide range of issues related to sustainability, digital risk management, and asset management.
A Thriving Enterprise
At several points over the life of a business, there will be a need to adapt to maintain a high level of financial control and management. Any business that grows to a level that it becomes necessary to hire a CFO can be sure that they’ve run a tight ship and made good decisions along the way.
Before that day, however, business owners and managers must take care to always put the company finances in the care of the right people at the right times.
Failing to do so can stunt the growth of the business, and in extreme cases, even lead to failure. Now that the phases of financial growth are clear, as well as which professionals are needed to deal with them, it’s all a matter of execution – which should be the specialty of any good entrepreneur in the first place.
Here are the benefits of using AP automation software:
Embrace Digital Technologies
Modern technologies or digital technologies are innovative solutions to traditional accounting methods used that may run the risk of human errors. Using advanced technologies can help you improve your business operations without the costly recurring expense.
It’s high time to embrace digital technologies when upgrading your business accounting. Using an AP automation software, you can eliminate 80 percent of your business accounts payable workload. In this way, your accounting staff can focus on other important things when running your business.
Here are the benefits of using AP automation software:
- Using an AP Automation Software streamlines your entire accounts payable process for a seamless business operation.
- Your business can scale rapidly without hiring additional employees, which helps in budgeting.
- It reduces payables operational friction and scales business payables conveniently and comfortably.
- AP automation software automatically processes invoices with greater accuracy than manual invoicing.
- It eliminates errors with machine learning technology to increase your employees’ knowledge and skills.
- Integrate your enterprise resource planning (ERP) system with detailed reports on transactions and reconciliation.
- Ensure your business tax compliance, eliminating compliance, and financial risks.
- Improve approval workflows, audit trails, and purchase order processes.
Other digital technologies to improve your business accounting is allowing your staff to undergo continuous learning via electronic learning or e-learning. There are short courses or e-learning modules available offered by online course providers and academies. Also, you can create your company e-learning material using online platforms.
To ensure that everything is accurate and avoid costly mistakes, it’s high time to upgrade your business accounting staff. You don’t want to risk your business because of human accounting errors or missed data. Having high-level financial management, embracing accounting software and other digital technologies, and developing an effective financial strategy are just some ways to help you achieve your business goals.