Lately, a founder asked me if I also consider production and logistics processes when dealing with cash flow optimization.
An interesting question which also shows the wide-spread misunderstanding that financial management and accounting are only back-office functions. In a way, just a tedious burden far away from operations. But this is not the case, not at all.
Where does financial management start?
The financial management starts already when ordering a pencil. It accompanies all business processes in a company. This is the same for both small and large enterprises. Surely, pure production processes are not directly linked to cash flows. However, the logistics, ensuring the timely delivery of e.g. means of production and materials, are well linked to procurement. This is preceding payments which define specific cash flows.
All company information gets together in accounting – exciting and effortful at the same time
To bring together the different pieces from all corners of a company makes it interesting to work in finance and accounting, because there is exchange of information with all business units.
This results in a huge number of different processes, depending on the size of the company. In my opinion, while processes in production and operations are constantly under review, this is less likely for administrative tasks.
Therefore, the work is known to be tedious and not very attractive, because staff have to process piles of documents or files under time constraints. It does not come as a surprise, as data of the whole company is flowing in and needs to be processed.
Timely and accurate processing of data
Independent from the source, it remains the task of finance and accounting to ensure the timely and accurate data handling for accounting and liquidity management.
This is because the liquidity of the company needs to be secured on a daily basis. Preconditions of its solvency are not only the ability to pay all liabilities, but also the accurate audited accounts. All business activities of a company need to be recorded in accounting.
Potential for process optimization in financial management
The potential for optimizing business processes is enormous. In addition, there is ample possibility to make use of the rapidly developing technologies.
The analysis of the company specific work flows in comparison with Best Practice and the assessment of possible standardization of processes is the basis for process optimization.
Who does profit from it?
The entire company profits from a more efficient data processing in financial management, resulting in more timely and accurate data and reliable cash management – first of all, the management, in need of recent information on the business development for decision-making, and also, to be able to concentrate on operations.
By decreasing repetitive and manual tasks, the motivation of the finance and accounting staff grows. They can now find the time to analyse the data and become true financial business partners.