Five Things Finance Teams Should Think About While Growing

It is important to distinguish between scaling and expanding a firm. According to the Harvard Business Review, scaling is the process of increasing revenue at a much faster rate than expenses, whereas growth is the addition of revenue at the same rate as costs and resources.

After achieving product-market fit, successful companies may endure and expand rapidly without incurring additional costs. They do this by establishing the ideal corporate environment, putting in place the appropriate personnel and systems, and having mass-replicable procedures. 

The finance team is essential in helping the management team and the larger organization establish and implement the business’s strategy as a firm works quickly to face the difficulties of scaling up. Since it is becoming commonplace to use data-driven insights to inform strategic company choices, finance plays a crucial role in gathering and analyzing financial data. 

The finance team must create a model that can handle future expansion by comprehending the cost drivers and how they connect to the company’s intentions to expand. To efficiently handle far more complicated transactions, finance must support the business model in addition to conventional capabilities like accounting, tax, financial reporting, budgeting, and forecasting. These are the five most important scalability factors for finance teams.  

1. Increase the Precision of Forecasts 

The higher the level of precision in revenue growth and profit forecasts, the better you will grasp the financial needs for scaling. One problem for businesses that undergo hypergrowth and must make rapid expenditures to keep up with their expansion is running out of funds. A more accurate and reliable projection may be made if one has a firm understanding of the company model that needs to grow and how it has worked for others. 

Covid-19 is radically changing how companies and finance teams anticipate, according to strategic finance. Cash reserves are more important than ever when revenues change and organizations face new costs. A finance team’s most recent projections and budgets are out of date by the time they are presented to the C-suite due to the environment’s fast change.  

It makes the case that in order to produce more models with a bigger effect in less time, finance teams need a new forecasting framework that values dynamic planning, cross-departmental cooperation, and thorough data integration. 

By learning how to optimize operations, cash flow, production, personnel, and financial management, increasing forecasting accuracy provides the opportunity to reduce costs. Strong, thorough forecasting is essential for financial planning as well as for presenting the figures to possible investors. In the end, the primary factor influencing investment choices and the standards by which the company will be evaluated are the statistics. 

2. Enjoy the Advantages of Automation

Automation offers your finance team a chance to lessen the workload associated with routine chores by allowing teams to focus on higher-value projects. Opportunities to automate processes such as accounting, forecasting, planning, reporting, reconciliations, budgeting, and intercompany transactions would benefit finance greatly. One of the best services today is Norman.

The bigger you become, the more advantages you may get from standardizing your financial strategy using automation. By automating finance-related processes, the finance staff can focus on being a more strategic partner to the company. 

For instance, payroll, record keeping, reporting, and accounts payable and receivable are just a few of the many operations that may be automated in the finance department using Robotic Process Automation (RPA). Up to 80% of financial executives have either already deployed RPA or intend to do so in order to improve accuracy and compliance, increase worker productivity, and save costs, according to Gartner. 

3. Be Aware of all the Requirements

Developing a platform may require spending money on international expansion. The requirements for employment, licensing and commerce, shareholders, compliance and taxes, and other areas are unique to each new growing market. 

Additionally, there will probably be particular financial needs and limitations on cross-border money transfers. It’s important to have adequate time since, as you grow, you’ll need to establish new banking ties, which may take some time. Seek appropriate guidance to comprehend all ramifications in order to position yourself for success in new markets, such as collaborating with an advisory partner that has legal and regulatory expertise.

4. Take Out the Labor-Intensive Tasks Throughout Tax Season

A company must negotiate several tax regimes and international agreements in each new market it enters. To control how transactions between organizations in different jurisdictions are handled, a robust transfer pricing system is necessary. Setting this up beforehand can save a great deal of time and work when it comes to taxes as your digital business grows. 

5. Improve Your Cash Flow Management

For finance managers and their teams, cutting expenses is always crucial, but it’s much more crucial when a company is growing. Cost discussions are important to influence choices as they are made, as well as provide guidance on how to keep costs low.

Scaling involves cost control, but money is also necessary to achieve hypergrowth. According to a Deloitte poll from 2021, cash flow and liquidity concerns are the main worry for three out of four scale-ups, who are confident in their present strategy and business plan. 

Maintaining control of your financial condition is essential to achieving your goals. Your money may be spread across many jurisdictions as you grow, some of which may have movement limitations. Recognize the restrictions this can have on your future financial circumstances. As your company expands, your financial requirements will also change, so it makes sense to keep looking for ways to streamline your financial procedures.