Based on market data, 74% of startups shut down within five years because of the inability to promote appropriate and realistic financial management.
When duly structured, processes make routines easier, minimize mistakes, and avoid the waste of time and money. Also, the financial department should convey an image of transparency, reliability and security.
Initial preparation of financial data is key for the appropriate enforcement of accounts payable, accounts receivable, treasury and bank-related procedures. Below are key issues that should be taken into account:
- Due Dates – ask suppliers for payment terms and due dates that work for you, so that you can review whether the service or product was duly delivered, send the invoice to the tax team to check whether the taxes and the invoice itself comply with the laws in effect, and then have the financial team include the payment in the cash flow and at the bank.
- Organization – Establishing work standards and processes helps create a more holistic vision, to ensure everyone works according to the same terms. Separating documents to be sent to accounts payable, according to due date, supplier and price is a great way to start.
- Classification – Whenever it is necessary to separate expenses according to cost center, make sure the expected division is clearly determined and fulfilled.
- Weekly Payments – Banks allow clients to organize their payment schedules, including the option to schedule all payments for a given day of the week. Doing so makes the approver’s life easier, as they can schedule specific days in their calendar to oversee such task, providing for efficient time management. Once payments are scheduled, the financial team will be available to perform other activities, as well as to collect any payments due, reissue bank payment bills, follow up on cash flow and KPIs.
- Cash Flow – Allows for the improved management of payments and receivables for decision-making processes, between fund raising or investing, whenever there is available balance.
- Document Storage – All invoices and proofs of payment should be kept for a five-year period. Personal Department documents, in turn, must be kept for ten years.
- Contracts – Make sure you have easy access to your service agreements or supply agreements, so that you can double check any agreed terms or price increases, when necessary.
- Exceptions – Be careful for exceptions not to turn into rules; skipping any steps of the process may translate into mistakes in projections and decreased report reliability, rendering it ineffective.
Other divisions and departments are also affected if the financial department does not have a clearly established routine.
Unlike what most people thank, financial processes are complex and cover several tasks and phases. There is no room for mistakes, as they are tied to financial resources. Companies should focus on optimization, having strong partnerships with suppliers, reduce waste, decrease the amount of time used in the processes, in order to guarantee operating safety and efficiency.
Cibele Carvalho Gesualdo
Manager – Financial Management