Whether you are a small business or a large company, your existence and your survival in the competitive world of today depends largely on the way you carry out your financial activities. That is the reason why most small businesses make sure that they have a separate finance department that can help them with the day to day finances as well as more. Depending on the size of your company and the amount of business that you currently have, it could be just one guy sitting at his laptop, or it could be a whole team of financial wizards working together. The activities that these financial gurus cover are versatile and diverse, and they include, among others, bookkeeping, providing the latest financial reports to the owners, and helping the company through tough times. They also help the management make strategic decisions when the time comes.
On a day to day level, your finance department will mostly be keeping up with the daily transactions that occur in the business. This keeping up will include monitoring all the transactions that happen and reporting on them to the management. Also, if there are any activities that the government needs to be aware of, the financial department will take care of that too. In a small business, most of the roles are taken up by family and friends, but as far as financial responsibilities go, we suggest hiring a professional so that you can stay away from murky waters and carry your business smoothly. This is unless your family member or your friend is a financial wizard. You could also hire an outside financial consulting firm, but that will cost you, and as a small business, you might not have the juice for such an expense.
This brings us to another of the major roles of a finance department: identifying and approaching various unsecured small business loan lenders for a strategic move that is necessary but costly, and the company’s budget cannot hold it.
Here we discuss in detail, some of the responsibilities that a finance department of a small business carries:
Like mentioned earlier, the most basic role of a finance department is to monitor and track the day to day transactions that occur in a business and prepare the financial statements. If you are a small business owner and you want to expand your company, then you need to know what happens on a daily basis so that you can plan to grow it in the future. The high-level decisions that are needed to expand your company will be based on the daily reports that you get from your finance department. This daily record-keeping includes keeping the books, preparing the financial statements, taking care of the payroll, preparing income statements, and more. These reports could be weekly or monthly, depending on the management’s needs.
Finance Department and Accounts payable
Apart from taking care of all the internal finances, the finance department is also responsible for keeping track of all the transactions that happen outside the company. These include all the invoices, bills, and more. The finance department will be tasked to monitor them, report them, and act on them in a timely manner. You might know just how much trouble you can get into just because you are not paying your bills at the right time. Not only does it not give you a reliable image in the market, but you also lose the relationship that you had with your vendors, customers, and manufacturers. Paying your invoices and bills in a timely manner will ensure that you have goodwill with your clients and vendors and that they respect and trust you. This is what the finance department can do for you. Another thing about timely payment is that you won’t have to pay the late payment charges that might not seem too much at a time, but over time they can really put a dent in your profits.
Just like the bills and payments that your business has to make, the finance department is also in charge of the account receivables and any other form of money that has to come into the business. This also includes all credit collection activities. The finance team will generate invoices and send timely reminders or ask the proper department to do so, as well as monitor the incoming payments. This will include keeping track of the customers that are paying on time and the ones that are paying late. They will usually generate a monthly report on the various activities that have been undertaken over the course of the month.
One of the most important features in any business is the payroll system. It doesn’t matter if you have a handful of employees or dozens. What matters is that they are looking to you for timely salaries and other perks that they have been promised. This is where the financial department comes into play. They will manage and execute the entire payroll system, which will include not just the salaries but also any leaves, overtime, raises, or bonuses that have to be paid out.
Financial statements and reporting
One of the major ways that business leaders and management teams can expand their businesses is to take risks and be innovative about their future strategies. They cannot do that if they don’t have a clear picture of their current situation, especially their current financial situation. The financial team can really enable the leaders to take necessary actions at the right time by keeping them well informed through reports and financial statements. This is especially the case at the end of the fiscal year when the management has to decide what route they are going to take in the new year and how they are going to execute various functions differently this year. The reports will not only tell them about the various incomes and expenses but also a detailed review of all the transactions and whether the business was able to achieve its yearly goal or not.
Apart from the above mentioned general accounting tasks, the financial team also has other various activities to take care of. This includes the legal compliance aspect. This is where the finance department needs to keep up to date with the current laws and regulations of the country, state, or city that they operate in. If they know the rules and regulations, they can ensure that all their standard practices are compliant and that no fraud or theft is going on. One of the ways that they ensure this is to create procedures and enforce them so that the entire company follows them, all the transactions are transparent, and that all the employees follow only the best practices that are required by the law.
Another role that the finance department plays in small businesses is to identify and approach the best outside financial options when they are needed. As a business owner, you know that there are certain times when you need to undertake an activity, but your budget just won’t allow it. This is when the financial department can advise you and guide you towards the best possible solution like small business loans, angel investors, and more.
These are only some of the various roles that a financial department plays in the growth and survival of a small business. That is the reason why most businesses have a highly capable and skilled financial team at their side so that they can report and advise them accordingly.