After a year and a half, many of us have grown used to the upsets that have resulted from the Coronavirus pandemic. While people have been feeling the pressure at home, around the world, businesses have been affected by the rising prices across supply chains worldwide. The cost of production and distribution for raw materials and goods alike have been driven up by a conservative approach at the start of the pandemic wherein manufacturers, expecting a massive downturn in consumer spending, cut back.
Of course, that spending didn’t stop, and supply chains found—and still find—themselves overwhelmed. This has only compounded since, with logistical costs going through the roof.
Labor costs have also been on the rise. Between a reduced number of workers due to fears of contracting the virus and districts across America implementing higher minimum wages, many businesses are finding more cash flow being funneled into wages, salaries and recruiting.
With over a year’s worth of trends to look at, today executives can read the pulse of the global market better than in March 2020. These conditions make it a time to review your finance function to ensure that it’s as strong as possible and set up to drive profitability.
What is Your Ideal Finance Function Now?
Your finance function forms the backbone of your business; make sure it’s aligned with your business strategy. Where is your company now, and where does it need to go? How has your cash flow changed as a result of increase in labor costs, shipping costs, and container shortages?
You may also be thinking of a massive overhaul for your business. Is it time for divestment, or to transition from owning to franchising? Perhaps a massive change to your strategy will allow you to make the most of your resources going forward.
Analyze Your Gaps
To find the best path forward for your business operations in today’s market, it’s imperative to identify any gaps in your current financial strategy. Does your accounting department take too long to close the books each month? Are they having difficulty ensuring accuracy?
Taking recent market shakeups and how they’ve affected you into account will help you implement contingencies for the future. That’s always something good to have in your pocket even once the world starts to move toward economic recovery.
Determine the Business Impact and Effort Level
Once you’ve assessed your team, systems, and processes, it’s time to develop a plan to adjust your finance function. Any changes to a business will take resources and will affect the day-to-day function as they’re being implemented. Being able to assess the business impact and the effort level for adjustments along your Desired State Roadmap will help you implement them in a more efficient way and will help avoid any unexpected hiccups in your operations.
Use Your Tools
Having the right collection of business tools in your belt will help when it comes to strengthening a finance function. Here are some vital ways to use the ones you likely already have in place:
- Budget and cash flow forecasting: Consistent, rolling forecasts that loop in leadership for budgeting can make for more actionable insight, especially when backed by management support.
- Strong performance measurement: Department and individual performances are both stronger and easier to assess if a business has solid Key Performance Indicators (KPIs) to drive them. Clear KPIs mean that any deviances are much easier to report, and much easier to pinpoint. Optimized management reporting helps keeps a business on the right course.
- Accounting and internal controls: Now more than ever, it’s vital to have a finger on the pulse of cash flow within a business. Inconsistent closing times can mean inefficiency, time lost backtracking, and potential undermining of other parts of the department. Accurate, timely accounting and reporting also helps the department responsible for forecasting to better budget, and plan for inconsistencies and shakeups in the market.
Execute the Plan
Finally, with a strong Desired State Roadmap as your guide, you can gain support of company leadership and begin identifying tasks, assigning responsibility, and setting a timeline. A well-planned implementation of adjustments to a finance function will ensure a successful transition and smooth landing.
In turbulent times like today, a strong financial foundation is critical. If you have specific concerns with the status of your finance function, or are looking to create a Desired State Roadmap, NextLevel can help. Our team of executive talent will help you navigate forward or successfully pivot your strategy.