2022 is here. Ready or not, here we come. Many entrepreneurs are fairly exhausted as the 5th wave of COVID contributes to ongoing waves of uncertainty. But believe it or not, opportunities will abound and don’t forget that “luck” is what happens when preparedness meets opportunity. Most entrepreneurs I meet are not thinking strategically about the merit of their finance function. Our intention is to empower entrepreneurs to achieve their goals. Here’s our list of 10 simple ways to upgrade your finance function this year.
- Write down a revenue target for 2022. Here’s how I recommend doing that. Answer this question first, “What’s your three year target?” Most entrepreneurs need less than 60 seconds to answer that question, so the same is likely true for you. Take another 60 seconds to make sure you feel it is realistic and achievable. With that number in mind, set your 2022 revenue goal as a milestone along the path. Be specific. Be ready to commit. Be ready to tell your team that this is what we’re reaching for.
- Upgrade to cloud-based accounting software. If you aren’t using cloud-based software you are missing out on the efficiency advancements. It’s 2022. Switch to the cloud. If your finance team is unwilling to make the change then you may want to consider upgrading your team.
- Insist on monthly financials. You have many priorities but if reviewing your financials each month isn’t one of them, then how important is financial performance to you really? And if your team is not issuing financials to you each month, or they are behind by months, then you need to find out why and get any issues resolved. Perhaps you need to hire more help, but chances are an opportunity exists to leverage better tools and procedures to speed things up.
- Organize your P&L by department. I’m always surprised at how many income statements organize spend alphabetically. Can you imagine if I organized the words in this blog alphabetically? It’s no wonder most business owners don’t feel confident reading their financial reports. An income statement is part of traditional financial statements, which are subject to generally accepted accounting standards, but most accounting standards leave liberties with how the P&L is presented and you would greatly benefit from grouping your spend by department or function.
- Use time tracking software. For tech companies, salaries make up the biggest spend and yet time tracking is often neglected. Tsheets is easy for everyone to use but I’d suggest investing in BambooHR which will enable you to efficiently track time off requests, vacation, sick days, etc.
- Use expense tracking software. Tools like HubDoc are fantastic for helping you get rid of your receipts quickly. Snap a pic or forward an email receipt into the dedicated email address and that receipt gets attached to the transaction right in your software. This will save you the hassle of gathering receipts at month end. Once your sales team starts travelling for work again you may want to consider Expensify which is even better at managing team expenses efficiently. No more receipts attached to excel worksheets. Your sales team will love you for it.
- Set a spend plan. Since you already have your revenue target nailed down in step one you can now add in a spend plan to complete an annual budget. This serves as your financial roadmap and once it’s in place, get your finance team to issue you monthly variance reports to keep you on track.
- Establish three leading indicators (KPIs). How will you know if you are on track to hit your 2022 revenue goals? Give some thought to how many new customers you need to acquire this year and how many existing customers you need to retain and then lay out at least three metrics that you will check each month to keep you focused on your goal.
- Establish a monthly financial pulse. The third week of the month is a great time to check in on your finances and dashboards to make sure everything is still on track. Sometimes 30 minutes is all that is needed, but the habit will pay off.
- Have a quarterly performance review. How did we do? How are we doing now? Will we hit our plan? What issues can we address? What are our rocks for the next 90 days? Which of these finance suggestions should we implement first?
And that’s 10 simple ways you can elevate your finance function in 2022. Our vision is to empower Canadian entrepreneurs by encouraging and supporting your pursuit to grow successful, impactful businesses.