How to Prepare Your Business for Growth: The Financial Checklist

If your goal is to expand your company, congratulations are warranted. It’s an exciting move but one with its own set of challenges. As your company expands, it’s essential to ensure your financial systems are capable of handling increased complexity. So, let’s break down the financial steps your company needs and get your company moving in the right direction.

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1. Evaluate Your Current Financial Processes

Prior to scaling, first review your current financial position. Start with your accounts, your budget process, and how expenses are handled. Are there certain areas where the process can be streamlined? For example, a purchase to pay process is just one of the various financial procedures that will need to be streamlined as your company grows. You don’t want to be bogged down with old habits of how things are done, which might get in the way of momentum.

2. Develop a Scalable Budget

At the initial stages, a rough estimate may suffice. But as the company expands, the costs are sure to increase, and the revenue may not stay the same. To operate within constraints, the company will require a detailed and extensible budget. This requires forecasting costs based on the expected expansion and projecting variable revenue.

3. Research Cash Flow Management

Good cash flow is the lifeblood of any business, especially when you are expanding. Cash flow control is just making sure there is enough money entering the company to pay for day-to-day costs and save for costs further ahead. It’s simple enough to talk about, but it’s something most businesses get wrong, and issues arise when bills are payable or investments must be made.

One simple method of gaining control of cash flow is through proper invoicing practice. Make sure the invoices are clear and send them immediately.

4. Get Your Finances Under Control

As your company expands, your tax bills will also escalate. There are simple tax bills for most small businesses, but corporations have VAT and company tax complexity. A professional accountant will be able to handle the changes for you, complete the returns for you, and arrange tax credits so your affairs are tidy as your company expands.

5. Invest in the Right Tools and Systems

With expansion also come more transactions, bills, and employees. You will require efficient and scalable financial management software. Choose accounting software with multiple-user support, real-time financial data, and compatibility with other associated software like payroll and inventory.

6. Maintain Proper Financial Reporting

You cannot manage what you do not monitor. Financial reporting is essential as your company grows. By tracking key metrics like profit margins, costs, and debt ratios, you’ll have the insight needed to make good judgments. Make a habit of reviewing your financial reports monthly or quarterly.

7. Establish Your Credit Profile

As your business expands, you may need to borrow money for expansion or operating expenses. A good financial record will make it easier to borrow money or obtain credit. To ensure your credit rating remains healthy, pay bills on time, manage debt with care, and talk with a financial advisor to establish your credit over time.

 

Wrapping It Up

Expanding your company isn’t just about acquiring new clients or bringing in new revenue – it’s about ensuring your financial setup can handle the added responsibility. By taking these steps to strengthen your financial processes, from simplifying your budgeting to bringing your equipment up-to-date, you’ll be ready for expansion without facing financial issues. Don’t rush the process – take the time to implement it, and your company will be ready to expand step by step.

 

Ken Boyd

Author: Cost Accounting for Dummies, Accounting All-In-One for Dummies, The CPA Exam for Dummies and 1,001 Accounting Questions for Dummies

(amazon author page) amazon.com/author/kenboyd

(personal finance book/ self-published) 34 Stories That Explain Personal Finance