Common Financial Management Problems in Growing Businesses

 

Financial management provides the foundation for business strategy and execution—a business function focused on the strategic planning, directing, controlling, reporting, and forecasting of financial activities within an organization. Financial management is crucial for ensuring a company's financial stability, growth, and long-term sustainability. But as a business grows, financial management becomes more challenging and complex, potentially preventing a business from getting the clarity needed to make good decisions. Here are some common causes of financial management challenges facing CFOs and other finance leaders.

1. Precision planning

Having a precise and timely financial plan that you can execute and manage against is one of the most important components of a healthy business. But planning is a discipline that uses a lot of financial information from different sources, making it time-consuming if the appropriate tools and processes to easily gather complete and timely data aren’t in place. What’s more, the planning process won’t help prepare the company for what’s ahead if data isn’t properly analyzed and used to predict and plan for different future scenarios. This can lead to problems such as overspending on the wrong priorities, inefficient allocation of capital and people, and an inability to anticipate future financial needs—resulting in overlooked business opportunities, missed financial targets, and increased financial risks. And solid upfront scenario planning isn’t enough; finance teams need a financial management system to monitor performance in real time and frequently update forecasts with minimal work; otherwise they’ll be too late to kick in those scenarios.

2. Cybersecurity threats

Over the last decade, the rapid increase of security threats and breaches has put financial data in the crosshairs. Once considered the IT department’s responsibility, cybersecurity is a key business imperative requiring close collaboration with finance and other business leaders. Enforcing strong cybersecurity measures for your organization’s most vital information is essential, and finance leaders can contribute by working with IT to make sure that financial transactions and systems are secure. Finance and IT together can assess which information and systems are most valuable and would most likely be targeted by hackers or ransomware. All financial software and systems must be routinely updated, as these updates include safeguards against the latest security vulnerabilities. Restricting access to financial data to only essential staff is also a best practice. Cloud-based systems can help on both fronts, offering native security capabilities, regular and automatic updates, and strong access controls. Comprehensive staff training is another key part of successful cybersecurity strategies, as people are one of the most vulnerable aspects within a company.

3. Real-time data

Gathering financial data can be a time-intensive endeavor. Historically, creating a financial report such as a quarterly sales forecast could take companies a month or more. When leaders needed an update as business conditions changed, it could mean finance teams working late into the night pulling data from around the company. The ultimate benefit is timely insights for decision-makers, but the first obstacle is often just getting the necessary real-time data. Most older software systems don’t deliver real-time data, and many finance teams are still manually pulling their financial information from spreadsheets or systems that are outdated and require lengthy reconciliation. Because timely financial data is essential for accurate planning and overall analysis, it’s important to have access to that up-to-the-moment data as fast as possible. A financial management system with greater access to real-time data is vital to a proactive financial management strategy, as it lets leaders make decisions based on an organization's true financial health and operating performance.

 Common Financial Management Problems in Growing Businesses


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