Good financial management is critical to the success of any business. Yet small business owners often handle their own bookkeeping for reasons ranging from fear of sharing sensitive financial information, keeping staff costs in check, or wanting complete control. These reasons, while undoubtedly valid for start-ups and smaller operations, grow increasingly impractical as your business grows, explains Carlo Gualandri (pictured ) , Founder and CEO, Soldo.

 The most successful entrepreneurs learn quickly that accounting and finances are the lifeblood of business and deserve to be treated as such. Setting up a finance function is therefore critical for planning, especially forecasting on financial matters and predicting cashflow – an indispensable requirement to remain profitable. But when is the right time and where do you start, especially if you’re a start-up about to enter a growth phase?

Do the basics first

The three essential building blocks for an emerging finance function are a bank account, payroll and accounting software. They will form the foundation for the subsequent work your finance department will build upon and should, therefore, cater for your business’ current and anticipated future needs.

Apart from being a legal requirement, a dedicated business bank account makes it easier to manage cash flow, pay suppliers, sort out taxes, and calculate profits. It’s therefore sensible to use it to its fullest potential. However, before setting up your financial function, determine whether your current business account is compatible with the technology you want to use, offers the services and integrations you need, and whether the banking fees are competitive.

Treat finding a business bank in the same way as you would any other business supplier. Research the market and shop around for the best price, service, and benefits for your business.

To supplement your business cash account to help you do more, consider additional tools such as software for payroll and accounting. Take the time to examine the various software offerings to find a solution that best aligns with your needs. Cloud platforms, for instance, make it easy to collaborate online with your team from anywhere, while staying on top of your business’s cash flow in real-time.

Small business, big data

Mining the trove of financial data your firm generates daily can yield useful information for managing your business more effectively. Ensuring your finance team has accurate, and even real-time data at its disposal will enable them to identify opportunities or inaccuracies and act on it quickly.

Reliable data is also a prerequisite to attract potential investment.  Having an accurate picture of the money flowing in and out of the business can be the key to demonstrating financial health and organisation, often making it easier to convince investors of the viability of your proposition. Investors will be more willing to part with their cash if the business has an efficient and prepared finance department.

Managing spend

A way to track and regulate expenditure is the next item the fledgling finance department would need. Many start-ups overlook spend management early on and track expenses through employees only, which could quickly spin out of control as the company spends more and employs more staff.

Operating without an efficient spend management solution is a setup for failure and can severely hamper decision making. Research by Soldo found that nearly a third (29%) of growing businesses in the UK and Ireland struggle when choosing what business priorities to spend on. Almost a fifth (18%) said that they didn’t have enough financial insight to make effective spending decisions.

Setting up the finance department presents the ideal opportunity to address spend management and get complete financial visibility. Forward-looking businesses should also consider spend automation, since automating repetitive tasks will free up time for the finance department to focus on more complex, analytical tasks.

It’s all about scalability

Although it feels challenging to predict what’s coming next in the current climate, businesses can still make decisions while setting up a finance department to ensure it can scale alongside a growing business. The first point is to select software that is likely to be supported for the foreseeable future.

Cloud-based platforms present a big advantage here since they are much more likely to receive ongoing attention and even regular updates. Automation is another necessity for scalability as it takes care of many of the tasks that scale linearly with a growing workforce, such as data input and receipt tracking.

Without an effective finance function, a business is much more at risk of failure. A slick finance department running at full tilt can increase profitability, streamline processes, spur growth, and ensure long-term sustainability.