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The pandemic has, among many other things, highlighted the importance of good financial management. With the second wave in full force, some businesses have been forced to close down again, and government subsidies continue to evolve and change.
And while there is reason to be hopeful about 2021, it’s almost certain that the months ahead are still going to be a period of extreme uncertainty and rough sailing for many.
To steer through those stormy waters, most firms will need to improve their financial game. The first step is recognizing that financial management is not bookkeeping. Talking to your tax accountant once a year is not nearly enough to position a business for success—particularly now. “Like many businesses, our past financial support was focused on the tasks of general bookkeeping, like receivables, payroll, expenses and so on,” said Shari Walczak, co-founder, The Garden. “Bringing in a partner who could handle those responsibilities, but also provide the financial planning expertise of a CFO, has been a game changer for us.”
As 2020 draws to a close, we offer five tips to set your firm up for a prosperous 2021.
Have a plan: Understanding the past used to be a fairly reliable predictor of the future. But last year doesn’t look very much like this year (understatement of the decade), does it? While insights from previous years are still important when trying to forecast what may lie ahead, you need a future-focused plan that accounts for easily adaptable scenarios should there be material changes. An expert pal (*raises hand*) comes in super handy during this exercise.
Get to know your cash flow: Your bank account balance is not a good indicator of your performance. In the marketing world, it’s really common to be paid in advance for services to be completed in the future. It’s really important to know which funds are for services already completed, which are for services still to be completed, and which funds were paid to you but are owed to suppliers. Without this understanding, you could draw dramatically different conclusions on the state of your finances which, in turn, could lead to some bad decisions. Cash flow forecasting is extremely important, but it’s not profit.
Understand capacity: This is a huge opportunity that often goes overlooked. Agency leaders, we need to be having these discussions: timesheet or no timesheet? Fixed price or value price? Whatever your methodology, you still need to understand how much business your agency is capable of doing to maximize profit. Without this understanding, it’s impossible to determine how close you are to optimizing your potential. A proper financial management plan can account for this, helping inform the size of your team, the rate for your services, and the profit you can expect.
Stay current on government programs and to maximize benefits: TWS? CEWS? CERS? CEBA? These programs continue to evolve as the government tries to adapt to the changing needs of businesses. Even if you didn’t qualify before, you might qualify now. Keep informed and ensure you are applying for what you are entitled to.
Finance partner means business partner: Once upon a time, it was sufficient to rely on your finance team to add things up at the end of the month and tell you how you performed. If they got you this information by the middle of the following month, even better. But these days, businesses need to evolve past a transactional view of their performance. Finance teams who understand your business strategy and can analyze financial and non-financial information are among the most strategic business partners to help inform operational decisions. This is one area you don’t want to go it alone.
“By working with an expert partner, we now have the information to make timely financial decisions and focus on proactive strategic growth, rather than being stuck in reactive mode when it comes to building our business,” said Walczak.
fin/ally is the finance team of the future for high potential businesses in creative fields, offering both a strategic voice for growth and a daily doer of the finance stuff you don’t want to do. We exist to help high potential entrepreneurs be financially successful without the stress and yawns of traditional financial management. Please visit us at www.finallycpa.com to learn more ways we can help