Is Your Financial Infrastructure Positioned for Growth?

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When is the best time to put accounting and financial management infrastructure in place? The answer might be “Yesterday.” 
As a small-to-medium-sized business (SMB), you might wonder why you should establish a financial infrastructure when everything is working out fine right now — but the health of your company may depend on it. Here are four key reasons not to procrastinate and to build up your capabilities sooner rather than later: 

  • It’s easier to do it now. Like anything, it’s easier to make change in a smaller environment when activity velocity is lower and slower. It’ll only get harder later when you may not have the luxury of time to plan, consider what you need, get it up and running and get everyone on board.
  • It provides make-or-break visibility into the business. While small and medium-sized businesses live and die by cash flow and good fiscal management, the reality is that they typically are challenged with tight cash flow, a slim margin of error and no real financial safety net. A solid accounting infrastructure lets you monitor and analyze the data to make sure your business is on track and lets you know exactly where you stand at any point in time, so you can avoid unpleasant surprises that could critically impact your business.
  • Compliance within an ever-changing regulatory environment. As the Greek philosopher Heraclitus noted, “The only thing that is constant is change.” That’s certainly true when it comes to the regulatory environment. ASC 606 and IFRS 15 are revenue recognition rules on the horizon today, and we can be sure that there will be others tomorrow. By having the right financial infrastructure in place, you’ll be able to more easily keep up with and comply with the ever-changing and complex regulatory environment.
  • Early monitoring makes you better positioned for growth. Studies indicate that it’s very beneficial to put early financial monitoring systems in place. When SMBs establish tools to measure such metrics as profitability, customer acquisition costs, and budget variances, they experience increased growth and valuation as compared to their counterparts. Such frontrunners are able to monitor their businesses in real time, develop accurate trend reports and forecasts, and identify potential roadblocks and opportunities. They have access to the data they need to make critical decisions such as when to hire, raise capital, invest in R&D, etc.

You might wonder how you can plan for future growth and know what you will need in the future. You can start by visualizing what success might look like 12 to 24 months from now. Consider the details of what will be different. What type of business activity, employees, and customers might you have? What would you need to do to get there and what would your organization need to look like to support that growth? Consider the changes that you might need to make in products and services, hiring, and marketing and sales, among other areas. Make sure that whatever infrastructure you put in place is flexible and scalable to grow with your needs. 
With the critical financial and operational pressures SMBs face today, you can’t afford to know what’s going on in your business. By establishing a full view of finance and operations across the entire business, monitoring business metrics, and analyzing them by different dimensions and angles, you will get a clear picture of business trends, issues and opportunities to make more strategic business decisions and chart a path for business growth.

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David Furth is President of Leap the Pond. He can be reached at [email protected] or 1 (203) 361-9200.

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