Operating a business is no simple task. Especially as your business is growing.
The demands on your time and focus are constantly changing and can easily become overwhelming. This is why it is so important that you understand the functions of a successful business. Most importantly, that you understand how to apply them to your business.
So, let’s dive in!
Core Business Functions
Before you can really understand the Three Core Accounting and Finance Functions of business, you need to start with the three Core Business Functions. So, that’s where we will begin.
There are three main functions that are required to be successful. It doesn’t matter what industry your business operates within, you need:
- A Product or Service that clients want to purchase
- Leadership and Management talent to oversee the employees and fulfillment of the product or service
- You need a right-sized Accounting and Finance team to manage the money and the capital needs of the business.
When, and only when, these three functions of business operate at their best will you realize your fullest profit potential.
Visually, it looks like this;
Early on in your business, you will find that these three functions are easy to address as the founder. However, as your business continues to grow, you will find that it becomes unsustainable to manage everything yourself.
As a result, you will begin to notice that these functions can get out of balance. When this happens, profits are reduced or can even become negative all together.
Fundamentally, success in business comes down to keeping these functions balanced WHILE the demands upon each are constantly changing. It does not matter how large or small your business is. The principals apply the same.
Finance & Accounting Functions
The Finance function of your business also have three essential functions; these include Accounting and bookkeeping, Controller, and Chief Financial Officer functions.
Side note: Helping you scale your finance and accounting functions is what we do at Rising Tide Accounting (RTA).
Maintaining a balanced focus around these three finance functions are necessary to scaling your business and maximizing profitability.
At each stage of you business growth, there are different demands on each of these functions. This is why it is extremely important to understand what your business needs and when. The quickest and most consistent way to keep this balance in your business, is experience.
When you are growing or managing your business, it is easy to focus on just the aspects of the business you enjoy the most. Now, there is nothing wrong with this. Just make sure that you have a team in place to cover the other critical functions within your business.
Next, we will cover in more detail what these three functions include.
Chief Financial Officer (CFO) Functions
The functions of a good CFO include the creation and oversight of:
- Company Wide Financial Strategy
- Financial Goal Setting & Tracking
- Regular Stakeholder Meetings
- Report Review / Strategy Session
- Alignment of Controller & Bookkeeping functions
- Review & Preparation of Projections
- Management of Company Working Capital
Controller Functions
Controller Responsibilities include:
- Bookkeeping Strategy
- Advanced Reporting
- Accounting Oversight
- Budgeting & Cost Controls
- Oversight of Accounts Payable
- Management of Accounts Receivable / Collections
Accounting Functions
The Accounting & Bookkeeping duties include:
- Receipt Collection
- Data Entry
- Account Reconciliations
- Preparation of Reports
- Regular Payroll Processing
- Tax Reporting
- Processing Tax Payments
- Manage Employees
Conclusion
In conclusion, growing and managing your business is no small feat. The one consistent path to success is experience in each of these core functions. So, make sure to pay attention to each of these critical functions and look for experience at every turn.
If we can help, let us know!
