What are the best ways to manage your business finances during growth or change?

Budgets and forecasts are only as good as the assumptions used when forming them. Revisit often and try to overcome the urge to overcomplicate. A simple forecast that can be updated easily and is 90% accurate is far more valuable than striving for perfection in a model that no one wants to touch after the first iteration due to its complexity.

In the current situation of business in uncertainty and changing everyday. Business finance monitoring is vital points to closely monitor, there are some key activities to take into accounts:1) Cash forecast and budgeting shall be in place and regularly verify, 2) Liquidity/cash flow management need to be sure enough for support business operation, 3) Maximize revenues and minimize cost/cost saving, 4) Building up the stewardship culture in company, 5) Reinforce the systematic business flow and e-process to reduce man-power and efficiency of works, 6) All compliance shall be taken care. 7) Leverage the investment on the surplus liquidity in case. etc.

In my experience the most challenging period is when a company is fastly growing. This means that you need to anticipate unpredictable conditions having to do with new markets, products, customers. So you deal with changes that can affect your results like prices, GP, costs, cash flow etc. Since Greece is a market that has faced multiple crisis conditions in the last few years, from financial and banking crisis to war and inflation crisis consequences we were obliged to prepare our selves and our organisations for every possible result out of every case we had to deal. My priority was always to try to predict every possible consequence and I created many multiple scenarios for every case with the relevant results in my critical indicators.

Indeed budget and rolling forecasts are efficient and reliable planning and control tool, however, it should be build considering the business sensitivity analysis in various scenarios, also it should be translating a solid and realistic business plan that captures the market measures and changes.

Cash is king - it's coming from three sources - Customers - cheapest and best - sell and collect Keeping customers happy is a priority Investors - if you take in money from outside investors they want a return - keeping them informed through good and bad is important Banks/lending - less dilutive but more costly Ensure you can service it adequately before taking on any debt

We all know that cash is reality. But instead on focusing only on Cash Flow I’d rather suggest to have a look at Company’s Working Capital Requirements (or Necesidades Operativas de Fondos in my mother tongue). Working Capital requirements depend upon the operating cycle of the business. The operating cycle begins with the acquisition of raw material and ends with the collection of receivable so, logically, the working capital requirement calculation can be done via the following formula: WCR = Inventory + Accounts Receivable – Accounts Payable. WCR shows you the amount of money needed to finance the gap between payments to suppliers and collection from customers

While it's undeniable that managing cash flow is crucial for business survival and growth, some may argue that an excessive focus on cash flow management can lead to missed opportunities for innovation and strategic investments. It's essential to strike a balance between maintaining healthy cash flow and allocating resources for long-term strategic initiatives.

Throughout my career, over 20 year of executive leadership, never ceases to amaze me, how so many business ignore the life blood of any business. Even thought the BS and the P&L are paramount to monitor your business, the CF is the Crown Jewel. Watch your current and mid term cash needs, and really monitor capital investments and capital distributions.

Navigating cash flow challenges has been a constant learning curve. There have been instances where meticulous monitoring and forecasting have empowered me to preempt cash crunches and seize growth opportunities. For instance, by diligently analyzing cash flow statements, I identified periods of seasonal fluctuations and adjusted my business strategies accordingly, whether through targeted marketing campaigns or prudent inventory management.

As I heard one day, optimizing expenses is like trimming a bonsai tree; carefully pruning away unnecessary branches to ensure it grows stronger and more beautifully with limited resources. You can always have opportunities to optimize expenses through identifying and splitting the recurring and non-recurring ones, envolving maybe the procurement area to look for new suppliers to keep quality with low expenses, innovating in processes to excel results, easier and with less resources. And obviously, look for new technologies that allows you making things happen quickly and cheaper based on simplifying processes.

I always gave an example of a toothpaste we use at home. We use a lot of paste when the tube is new. And as we reach the end, we tend to squeeze it more and more. Remember our college days? The last of that toothpaste lasted many days (especially, if we keep forgetting to buy a new one). We can do the same in the business. And something we can achieve in $100/-, we mostly can achieve in $99/-. If we just save that 1% each time, over a period, we save a lot and suddenly our net profits are better. If we put this challenge, save 1% and involve the teams, we will find creative solutions.

Every profitable business should still look for ways to improve profitability. Keep a tracker to monitor savings, by regularly reviewing budgeted costs with actuals, with the department or business unit heads to understand the reasons and help challenge them to always use resources available efficiently and effectively.

Financial decisions affect both the profitability and the risk of a firm’s operations. An increase in cash holdings, for instance, reduces risk; but, because cash is not an earning asset, converting other types of assets to cash reduces the firm’s profitability. Similarly, the use of additional debt can raise the profitability of a firm (because it is expanding its business with borrowed money), but more debt means more risk. Striking a balance—between risk and profitability—that will maintain the long-term value of a firm’s securities is the task of finance.

At times, we have put a freeze on purchasing items such as tools when it may be a want rather than a need. Reviewing ROI and trends month to month and comparing them to previous months or if seasonal, prior year, same time frame find any inefficient or unnecessary costs. Incentives can be cost effective to increase sales and cut back on expenses, boosts morale, bringing synergy amongst each other. Announce achievements reaching the employee's or team's goals over the PA system. This can drive competitiveness amongst teams or individuals, improving the company's end goal.

Opportunities to save, opportunities to earn, and opportunities to invest with a long-term goal are always available in a business. Practical and realistic budgeting, operational efficiency, and cost control facilitate us to experiment. I recommend that we budget towards these experiments because without trying, we will never know, and many times we do not try because we think we do not have money/resources for it.

Implementing accounting software automates routine tasks such as invoicing and expense tracking, reducing the likelihood of errors and saving time for your finance team.

One of the principal methods of forecasting the financial needs of a business is the cash budget, which predicts the combined effects of planned operations on the firm’s cash flow. A positive net cash flow means that the firm will have surplus funds to invest. But if the cash budget indicates that an increase in the volume of operations will lead to a negative cash flow, additional financing will be required.

Always be reconsidering how your service is addressing the immediate pain points of your client and potential client base. Don't be afraid to completely adjust the offering in order to stay close to that need. You can experiment and leverage your reliable offerings with innovative ideas.

Market opportunities, growth opportunities, launch of new products or services must be preceded by a feasibility analysis. Measuring the impacts in the short, medium and long term, the resources needed and the risks to be taken, ensures that opportunities are taken advantage of and not wasted.

1. Maintain Rigorous Financial Discipline: Keep a tight rein on expenses, regularly review your budget, and adjust as necessary to align with growth or change. 2. Improve Cash Flow Management: Monitor cash flow closely, expedite receivables, delay payables without incurring penalties, and maintain a cash reserve. 3. Invest in Financial Expertise: Hire or consult with financial experts who can navigate the complexities of growth and change, such as a seasoned CFO or financial advisor. 4. Leverage Financial Technology: Utilize financial management software for accurate real-time data, which aids in strategic decision-making and efficiency.

All the 5 routes explained are largely the domain of the CFO and finance function. These are very sound practices, but also made more effective by communication. 1. Communication with other key leaders / influencers within the business to: - explain the changes, why they're happening / necessary, and - what these leaders can help to monitor, manage and feedback on. Get non finance ExCo and managers on board. This gives finance earlier warning, and allows them to spread the demands of the change so that there's wider ownership. 2. Communication with key external stakeholders. This includes shareholders, regulators, customers, and public as necessary. Obviously, need to be selective about what is shared externally. This does help.

We have experienced annual growth of 30%+ year over year. We do our best to budget and forecast, however this does not address the unforeseen events. We create trigger points along the way when the path gets bumpy. At each of these trigger points we execute on our pre-approved plan. - The optimistic scenario - The most likely scenario - The pessimistic scenario

Managing your business finances during periods of growth and changes can be a challenging task, however, here are some strategies and tools you can employ to help you stay on top of things: -Pricing Strategy: Ensure your pricing strategy supports your growth. It's important to cover your costs and make a profit, but also consider market conditions, competition, and customer demand. -Debt Management: If you've borrowed money to fund your growth, ensure you have a plan to manage that debt. Be cautious about taking on too much debt. It’s important to remember that every business is unique, and what works for one company may not work for another.

In the world of business, growth and change are inevitable. Whether you're expanding your operations, entering new markets, or adapting to unforeseen circumstances, the way you manage your finances can make all the difference. Consider your financing options carefully. Whether it's through equity, loans, or investors, secure the right capital to support your business's changing needs. Explore grants and subsidies if applicable. Assess and mitigate risks associated with growth or change. Diversify your revenue streams to reduce dependency on a single source. Purchase insurance to protect against unforeseen events. Transparent communication can build trust and support during periods of change or growth.