How to build a Finance Function for a Scaling Product Business

I have always resonated with the Mark Cuban belief to create systems that operate independently of specific individuals or locations, aligning with the concept of processes not limited by people or geography.

This philosophy should be applied to your finance function. You have to build a financial ecosystem that captures relevant data at crucial points that can be used for decision-making.

Operations First

The first most important part is understanding the key operational processes in your business - this is the foundation that finance will be built upon. Resource allocation should be directed to your economic engine, and the services that support it. For a product business it is being able to sell, collect cash, deliver product and manage their product. Review the scalability of your current operational processes and the technology that you use. Question yourself which phase of growth you are in, what growth targets are we aiming for, and does my current operations processes and tools support you at your highest point of targeted growth over the next 5 years.

Choose an operational process and tool that can scale. I have had great success with Cin7 as it’s usage and modules can scale with your company’s growth.

Bolt on Finance

Once you know your foundation of operations are strong, review your finance processes and tools that where they interact with your operations. Some easily identifiable items are: sales, debtor follow up’s, purchasing, supplier payments. Creating the interaction between operations and finance with a view to automate as much as possible. If at any point, anyone is duplicating information manually, there exists automation possibility. Then question whether your finance processes and tools will support you at your highest point of targeted growth over the next 5 years. I have found that both Xero and Quickbooks Online are flexible and scalable, through a few tweaks here and there, such as batching invoices or journals. We have found lots of timesaving through simplifying financials and rather build alternative views in a financial planning and analysis views below.

Deep Dive Financial Planning and Analysis

Now that your operations are humming, finance is purring and both generating crucial data points, you have to build yourself the window into your business. Consolidating your data (Sales, Operations, Marketing, HR and Finance) into a database and building views to interact with that data. We have used BigQuery and Looker Studio successfully for creating the views which are essential for decision-making, and as real time as it can get. KPI trackers (Average order value, revenue growth, Churn Rate, Lifetime Value, Retention Rate, Cart Abandonment rate etc.), leading measures, volume and gross profit comparisons are essential.

Cash is King, especially in consumer packaged companies, where growth sucks cash. Therefore, you have to have an automated thirteen-week cashflow forecast, so that decisions impact can be evaluated and adjusted daily.

Validation and Testing

Finance has a crucial role in reviewing, validating and amending data flow in this process to ensure the data is accurate and is trust-worthy. I have seen so many dashboards and tools fall flat and management no longer us them due to now-one knows where the Business Intelligence tool or Dashboard is getting its information from? A very well documented data flow, reconciliation and testing process is necessary that ensures quality control of your database.

Then spending most of your time running your company and making your decisions of off your data!