As your business starts to grow, it’s easy for the focus to be on sales, operations and managing the increase in day-to-day tasks. But what often gets overlooked is the need for your finance function to scale alongside your operations.
Without the right systems and processes in place, managing the finances of a rapidly growing business can quickly become overwhelming.
Fortunately, cloud accounting tools like Xero, combined with its vast ecosystem of integrated apps, provide a robust framework to ensure your finance function grows efficiently and effectively with your business.
This Halloween, Fintech Friday considers six top tips to make scaling your business less scary.
Start with the basics: Structure your Chart of Accounts
One of the most crucial (yet often overlooked) areas for a growing business is the structure of its Chart of Accounts. As your business expands, transactions become more complex and a poorly organised Chart of Accounts can lead to confusion, inefficiency and inaccurate financial reporting.
A well-structured Chart of Accounts will allow you to categorise your income and expenses in a way that aligns with your business’s specific activities. For example, breaking down your revenue by product line or service type will give you greater visibility into which areas of your business are performing well and which may need more attention. Similarly, categorising expenses in a logical and detailed manner helps in tracking costs and identifying where efficiency gains can be made.
The key is to plan for the future. Think about how your business might evolve and structure your accounts so they can easily adapt to that growth without needing constant restructuring.
Maintain good invoicing practice: Speed up cash flow
As your customer base grows so too does the need for efficient and effective invoicing. Sending out invoices manually or on an ad-hoc basis may work when you’re small but this quickly becomes unsustainable as your business scales.
Xero’s invoicing tools allow you to automate much of this process. Setting standard payment terms, sending automatic invoice reminders and using Xero’s recurring invoicing feature can all help ensure that you’re paid on time, improving cash flow and reducing time spent chasing payments.
Xero’s ability to connect directly to your bank feeds means you can easily reconcile payments as they come in, ensuring that your records are always up-to-date without the need for manual intervention.
Supplier payments: Streamline with batch payments
As the volume of your supplier payments grows, managing these one by one becomes time-consuming and inefficient. Switching to batch payments in Xero is an excellent way to save admin time and reduce the risk of missed payments.
Batch payments allow you to pay multiple bills at once, which not only streamlines the payment process but also provides a clearer overview of your outgoing cash. By using Xero’s batch payment functionality, you can upload payment details directly to your online banking system, ensuring accuracy and saving valuable time.
Tracking categories: Enhance reporting with revenue and expense segmentation
As your business grows, you’ll likely want deeper insights into how different parts of your operations are performing. This is where tracking categories in Xero become incredibly useful. Tracking categories allow you to segment your income and expenses without creating an overly complicated Chart of Accounts.
For example, if your business operates in multiple locations, you can set up a tracking category for each location and monitor how each one is performing financially.
You could also create tracking categories for different business units or product lines, allowing you to analyse profitability and costs at a more granular level. This kind of segmentation is essential for identifying which areas of your business are thriving and which may need further investment or optimisation.
Automate routine tasks: Freeing up time for strategy
Automation is the key to scaling any finance function. Xero offers several features that can reduce manual input and streamline your financial processes, from automatic bank reconciliations to recurring invoices and bills. The goal of automation is to free up time that would otherwise be spent on repetitive, low-value tasks, allowing you to focus on more strategic activities like forecasting and budgeting.
Integrating Xero with apps like Hubdoc or Dext can take automation even further, particularly around accounts payable. These tools allow you to automatically capture and process receipts, bills, and invoices, syncing directly into Xero and further reducing the need for manual data entry.
Leverage the Xero App Store: Expanding functionality as you grow
One of the most powerful aspects of Xero is its extensive App Store which offers integrations with countless third-party apps designed to enhance and extend its functionality. As your business grows, you’ll likely find that Xero alone may not cover all your needs. However, by integrating apps from Xero’s marketplace, you can address specific challenges as they arise e.g. inventory management, employee expenses, cash flow forecasting, approval processes and many, many more.
The key is to work with an advisor who can help to identify the pain points in your finance function and use their deep knowledge of Xero’s ecosystem to address them efficiently. This combination of knowledge and software can help you to scale your finance function without needing to constantly upgrade or overhaul your systems.
How can we help?
A growing business presents both exciting opportunities and new challenges and it’s crucial that your finance function scales in line with your operations.
By getting the basics right, you’ll have a solid foundation to facilitate growth. From there, automating routine tasks and exploring Xero’s App Store for additional tools will ensure that your finance function is not only keeping pace with your business but actively supporting its future development.
If you are scaling and looking to review your current processes, call 0161 905 1616 or email fintech@haroldsharp.co.uk.