Whether the organization is a startup or an inherited operation, finance plays a key role in your growth as a business founder. The financial stability of the system as a whole is achieved through various functions related to the finance department. While many people associate this department with money, it actually encompasses much more.
Growing companies also require a more defined role for the finance department, because their importance and importance grow together. However, as a business founder, the finance department of a young company aims to make fast business decisions and streamline work processes as efficiently as possible, while keeping costs low.
Keeping finances within a business is one of the most difficult parts of the process of inaugurating, owning, and maintaining a business. Since there is little or no preparation in the area of finance and accounting, and sometimes ends with such a level of disaster, because every decision such as hiring new staff or buying new equipment causes a series of conflicts.
In the first instance, consider bearing your own expenses. Consider both personally and your own business, both monthly and yearly. You need to know what you’re spending on and where all the expenses belong and how you manage everything.
Also think about separating your personal account and your business account, not putting everything in one bank account. When you learn to separate it, you realize your true income, earnings, and investments from your business and personal account, making it easier for you to carry the above data.
Finally, open several bank accounts for your business, such as your income, expenses, taxes, own salary, and earnings. All this will help you to know if there is a balance and if there is money available to grow the business or maintain some aspects, such as staff and team. It’s a highly visual method of knowing if you’re really in the red numbers.
The objective of this article is to discuss the key roles and responsibilities of a finance area in an enterprise in this post.
Department of Finance and Expectations of Startup Founders
The interactions with the founders of startups lead to the conclusion that the main role of the finance area is to ensure legal compliance and accounting hygiene in the company. Seed and Series A companies mainly belong to this category, playing the role of the business founder.
- The back office is the domain of 80% of the founders.
- The finance department is expected to participate in the budgeting process and generate GIS reports every month by about 15% of the founders.
- Financial departments are not considered strategic by more than 5% of the founders. Dealing with suppliers, customers and sellers fall under this category.
Continuous Series A funding changes the trend when the focus shifts to finance professionals. It seems that a strategic business advisor is needed right now. Accordingly, the finance area will assume an additional set of responsibilities, including budgeting, financial analysis, treasury, contracts, and investor participation.
As a business founder, you should know that the finance area of any entrepreneur performs five essential functions
1. Each transaction associated with its initiation is tracked and recorded in the accounting system
The finance department must maintain impeccable accounting as a primary objective. In addition to payroll management, this function also includes the creation of the accounting plan for the accounts required to manage the management expectations of the management information system.
2. Taxes and compliance
The finance department must ensure that the startup meets all legal requirements by submitting all government documents accurately and on time. It is possible to use a robust maker-checker process to reduce the chances of errors occurring.
3. Financial planning and analysis
Go beyond accounting for the finance department. Data analysis is also involved in this process so that decisions can be made on the basis of perceptions. Any decision made by senior management must be examined by the finance department, its efficiency analyzed and the risks assessed. The Key Performance Indicator (KPIs) in the finance department are highly valued because they help decision-makers make informed decisions. If you want to know about more bugs you might be making, here’s a video that might help:
4. Providing strategic guidance is one of the main responsibilities of the finance department
It helps create strategies that can support the establishment and growth of the startup. Together, sophisticated tools and expertise with a refined strategy can acquire data from sophisticated tools to help set realistic long-term goals for start-ups. In addition to identifying the right pricing strategy, target market, and product mix, the finance area can add significant value to the company.
5. Setting up a business and raising funds require a sound accounting system
It may be that your finance area can convince investors of the startup’s skills. An expert team of financial experts can drive fund-raising operations to excellence.
For a startup to grow profitably, sustainably, and successfully, the finance department must be able to make the right decisions at every stage of development.
The goal of this post was to provide a clear understanding of the key responsibilities of the finance team in an enterprise. This way, you’ll find it much easier to build the talent you need to outsource to your finance department, once you understand what this finance department does.
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