Sure, every small business could use a new sales person who can “make it rain,” but this year, we recommend you look to another – less obvious – position to fill the most important gap on your team (or that of your client or portfolio company). Most small businesses can unlock tremendous value by hiring the right resource(s) to take their finance function to the next level. The exact role to fill - bookkeeper, controller or CFO - will depend on your current resources and needs, but more often than not it starts with the bookkeeper.
“Tremendous” value? “Taking the business to the next level?” It sounds like a couple of bean counters are getting ahead of themselves, right? These are fair questions, and you’re not alone if they were the first things that come to mind. But from our experience buying and selling small businesses, we know that there are some companies that are worth more than others. And the businesses that were worth the most used their finance function strategically in every case.
The bottom line is that businesses grow profitably due to sound decision-making and great execution. If your finance function isn’t providing timely, accurate and relevant reporting then you’re fighting with one arm tied behind your back. Good data is the cornerstone of informed decision-making.
Do any of these questions sound familiar?
- When can I afford that next hire or capital expenditure?
- What metrics should I be watching, and how do our metrics compare to my competition?
- How profitable is each of my clients/projects?
- What can I do to eliminate invoicing delays and errors?
- Why can’t I get accurate financials when I need them?
- What controls do we have in place to avoid fraud?
Your finance function (your bookkeeper and/or controller) should be able to provide you with fast answers to questions like these. If they can’t, chances are good that you’re leaving money on the table by making decisions without better visibility. In the worst case, you could be putting your firm at risk.
Do you ever drag your feet on decisions because you don’t know if you can afford the cost of a particular investment, or if you’ll actually achieve the desired goal? On the other hand, have you considered the cost of not taking action? Timely reporting enables quick, decisive action when supported by the right data and metrics – not gut reactions or hunches. Make sure you empower yourself with a team and a process that supports fast, informed decisions.
You Can’t Afford a Cheap Bookkeeper
Don’t make the mistake of letting a low price tag tempt you to hire the wrong person. That's not to say you need to overpay for a skilled bookkeeper or controller, far from it. But an inexperienced or otherwise ill-equipped bookkeeper can have a detrimental effect on your business. At a minimum, he or she could take more of your time than they actually save. Having to review and correct the same mistakes each and every month can be extremely frustrating and kill your productivity. And that assumes you catch the errors. Imagine the impact of key decisions based on inaccurate financial reports. Such decisions can be lethal for a business.
Moreover, your bookkeeper (along with your controller, should you have one) must take proactive steps to establish and manage controls that prevent fraud. No room for shortcuts here either. You must trust your bookkeeper – the controls they manage and the reports they produce - implicitly. A great bookkeeper still needs to be managed, but can shoulder much of the burden of a small firm's accounting.
Remove Administrative Shackles
Most small business owners add the most value when they’re bringing in new business, making customers happy or dreaming up their next product or service offering. But they are often distracted from these duties by trying to manage their finance function or do too much of the work themselves. We believe you should spend time where you add the most value, and minimize time spent attracting, managing and retaining the talent required to manage your finance team.
You should also limit your involvement so you are only reviewing the reports your team produces to pick up on trends, issues and opportunities. Think of it this way: Does Theo Epstein (formerly the GM of the Red Sox and now with the Chicago Cubs) write scouting reports? Of course not. His value comes from reviewing the data presented in reports and making the tough calls. Yours should as well.
Where to Turn
To take matters into your own hands and embrace the opportunity that a well-oiled finance department can provide, please read our new eBook, “An Owner’s Guide to Competitive Advantage through Financial Management.” This eBook offers six practical steps every small business owner should follow to gain a new advantage from their finance department.
The Driven Insights Advantage
Driven Insights is experienced in leading service businesses on the journey to leveraging financial and operating metrics to accelerate growth. Our bookkeepers and controllers are charged with much more than simply “doing the books” – they ensure each client understands and uses the insights we share.
Interested in learning more? See for yourself how Driven Insights' outsourced bookkeeping can provide the insight and control you need to achieve your most critical goals. Contact us at firstname.lastname@example.org or 888-631-1124.