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Finance Department Process Flow
The following diagram depicts the directed flow of activities of finance department.
The importance of Finance department
Maintaining business sustainability and stability depends a great deal on finance departments within enterprises. All business planning and preparations of the organization’s budgets and forecasts come directly from your finance department. Making key strategic decisions, such as which markets to pursue, depends on the information received from the finance department.
Finance departments have four key functions (Recording, Controlling, Financial Planning and Analysis, Managing) which should communicate and collaborate seamlessly. In the following lines, we will outline what these four key functions include and why their automation and integration are important.
The first key function of every finance department is the recording function, which in fact includes the daily recording, analysis, and interpretation of all financial transactions within the company. Maintaining accurate financial records is of vital importance, as the entire operating in the financial department will greatly depend on their accuracy. Usually, there are three common recording tasks:
- Accounts Payable (A/P) refers to the money that the company should pay to its vendors.
- Accounts Receivable (A/R) refers to the money that the company receives from its customers.
- Payroll refers to the monthly payments provided to the employees.
Verifying accuracy or financial control is the second function of the finance department, which should ensure that everything recorded is accurate and adhere to financial regulations. In a nutshell, the controlling function focuses on managing the accounting team, controlling inventory assets, and ensuring compliance with the financial regulations.
3 Financial Planning & Analysis
Financial planning & analysis is crucial for an organization’s financial health as it enhances the ability of the finance department to manage and improve its performance. This function gathers relevant financial data, analyzes it, and provides thorough insights which help management make informed business decisions. This function includes:
- Creating visual reports about business performance
- Creating budget plans and forecasts that guide the business on a daily and monthly level
- Determining the price of company products
This is mainly the function of the Chief Financial Officer who is responsible for making strategic decisions and creating the overall financial strategy. As a result, the CFO should have a complete and thorough overview of the entire finance department.
Characteristics of an effective finance department
An effective finance department leverages the power of technology to align goals, strategy, and information sharing with other departments. A high-performing finance department drives cost efficiency, improves processes, plans and delivers budget on time, and uses data to deliver decisions that positively impact the business.
However, in order for the business to achieve this and long-term sustainability, business owners should work on optimizing and streamlining their finance processes. There are various technology solutions available nowadays which automate finance processes and core activities, reducing not only inconsistencies but also providing the finance team with enough time to focus on more important tasks. Very often, finance departments are facing challenges that make them inefficient. Some of those challenges include:
- Inefficient processes due to information silos which occur as a result to having outdated systems;
- Lack of clear ownership which can result in tasks undone or redundancy;
- Fraud due to insufficient visibility, and manual working
- Inability to properly manage information due to manual systems
- Lack of visibility and manual data entry which leads to mistakes and inefficient processes, etc.
Overcoming challenges and improving the finance department
Improving the finance department means making changes to the finance workflows which will increase efficiency. In times when digitalization is becoming increasingly popular, using digitally optimized technology solutions to automate your finance department will significantly improve consistency, accuracy, speed, and will ensure that your goals are properly met.
Automating and integrating finance processes
The finance department includes a lot of processes, which sometimes are done manually. This manual work is time-consuming and can lead to a lot of errors. By automating all those labor-intensive processes, you maximize time savings and improve efficiency.
In addition to automation of the processes, you need to ensure that the various parts of the finance department, including the various departments within the enterprise, are seamlessly communicating with each other and sharing information.
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