In the dynamic world of startups, implementing an efficient month-end process which produces timely and useful financial information will unlock the door to several benefits which were previously not attainable. It may not be the most glamorous part of running a startup (Fintoca would of course argue against that), but it's crucial for long-term success. Let’s break down why it’s so important.
1. Keeping Track of Financial Performance = Better Decision Making
In very simple terms, startups who are regularly reviewing their financial performance can make better decisions. Having a clear view of revenue, expenses, and profits or losses will enable Founders and C-Levels to assess whether or not business strategies are on track and leading towards the objectives that have been set. Consequently, decisions can be made to either continue with business as usual or rethink strategies if things aren't going as planned.
2. Early Detection of Financial Issues
A great month-end process will enable a quick turnaround of the monthly management accounts (or management pack), containing the financial results, statements and metrics necessary to understand the financial health and performance of the business. Identifying financial issues early is key to a quick response.
3. Future Planning and Forecasting
As a follow-on of points 1 and 2, regular financial reviews allow startups to forecast future performance using this information alongside future known knowns. These rolling forecasts are a great source of information which can (and should) extend to forecasting cash flow, providing key startup metrics such as forecast cash burn rate and cash runway.
From realigning departmental cost budgets in response to a change to forecast revenue, or taking back control of software subscription costs, the delivery of management accounts is key to Founders and C-Levels taking action in order to stay on track with business objectives.
4. Investor Relations
The existence of timely and accurate monthly management packs demonstrates to investors that the company is well-managed, has a clear understanding of its financial health and has the necessary financial insight to make quick strategic decisions if and when necessary. Consequently, this instils trust in existing investors and makes these startups a more attractive investment proposition due to being better prepared for growth.
5. End-to-End Financial Hygiene
One of the lesser spotted benefits of the month-end process is the regular and ongoing upkeep and management of all aspects of a startup’s accounts, including bookkeeping, bank reconciliations, balance sheet reconciliations and the necessity of accrual accounting. As such, startups will benefit from significantly lower costs charged by their accountancy firm for the annual statutory accounts filing and tax services as most of the information the accountancy firm would ordinarily need to prepare themselves will already be prepared and available.
Fractional Support from an External Head of Finance / Financial Controller
For startups who aren’t yet ready for a full-time Head of Finance / Financial Controller to implement and execute the month-end and management accounts process, Fintoca is here to provide that level of support for as little or often as it’s needed, but always on the basis that we are an extension of your finance function. We bring all the necessary knowledge and real-world experience in setting up and running all areas of a finance function.
Most startups already know they need a solid month-end process in place and an insightful set of management accounts to look at each month. But, if your startup doesn’t yet produce management accounts, or your existing process:
- includes reports full of hard-coded data, or
- is prone to human error, or
- is taking too long to complete, or
- is unstructured and lacks completeness, or
- doesn’t cover all aspects of a full month-end close process, or
- is a combination of some or all of the above
Contact Fintoca today, so we can learn more about your month-end needs and current pain points - and we’ll provide you with a solution you’ll love.
