90% of startups fail, but you want your business to succeed, right? 47% of businesses state financial matters as the top reason for their failure, which is why you must set your financial foundation strong.
After all, money is the lifeblood of a business. Its careful and optimal circulation ensures the survival of an organization.
It’s, therefore, crucial to deal with your business’s financial matters carefully.
Want to build a strong financial foundation? Dive right into this 6-step guide about building a strong financial foundation with the right accountant for your business:
6 Steps To Strengthen Your Financial Foundation
The foundation is important for any entity, be it a human, a house, or a business.
With a weak foundation, an entity can’t go a long way.
It carries the risk of falling at any time. So does your business if your financial foundation isn’t strong.
To strengthen it, assess your business needs first of all:
1.) Assess Your Business Needs
Your business needs are different from any other business, and so are your goals and tactics. Assess them and identify the financial challenges that you face or expect to face.
For instance, a financial challenge for a business expecting to expand to another country can be the accounting standards.
If it was following accounting standards A and the country where it intends to expand follows accounting standards B, it’d be a challenge the business must address.
Similarly, a business should expect to face a myriad of new challenges.
It must, however, have a strong financial foundation to solve them with minimal to no harm to the business.
Besides the challenges, the business must also set its short-term and long-term financial goals.
To accomplish them, it would need financial expertise and a seasoned accountant who would be an everyday guide for the financial performance of a business.
To find the right accountant, determine the expertise you require from them:
- Do they need to have industry-specific knowledge?
- Should they be experienced with business structure and size as yours?
- Do they need to be proficient in specific financial and accounting services?
2.) Find The Right Accountant
The new hire is going to play an integral role—setting a strong financial foundation—for your business, so you must ensure that they are the right person for this role.
How? By hiring them after a process of a thorough evaluation. Yes, it will cost you a little more, but you will be sure that your business is in the right hands.
The process starts with searching for potential accountants. Some of the ways to do that are:
- Seeking recommendations from trusted sources: your trusted sources are your long-term business partners and employees; ask for their recommendations. For 82% of employers, referral hiring is most effective in terms of ROI
- Publish a job opening: Another way to invite job applications is to publish the job on your website, newspapers, or online platforms such as LinkedIn or Indeed.
- Review online profiles and testimonials: you can also visit online profiles of open-top-work accountants and contact the qualified ones. You can find these profiles either by doing a Google search or exploring online platforms like LinkedIn.
- Evaluate the potential candidates: once you have received enough job applications or recommendations, start evaluating them according to your requirements and filter out those who have the knowledge, skills, and abilities (KSAs) that you require.
Conduct An Accounting Test
Now that you have a pool of potential candidates who have the required KSAs, it’s time to shorten the list by conducting accounting tests.
Testing ensures that the applicants truly possess all the KSAs mentioned in their applications. This way, you find the best from a large pool of applicants.
If you have the resources and time, conduct an on-site test or hire a testing service that will conduct the test for you.
Sometimes, calling applicants on-site for the test is not possible due to geographical limitations.
In other cases, you don’t have enough resources and time to conduct an on-site test. In such a scenario, conduct the test online.
Interview The Top Scorers
Many will pass the test, but you want one or a few accountants, right? At this step, you call the top performers of the accounting test for an in-person interview.
You meet the top performers, talk to them, further evaluate them, and try to shortlist the ones you’ll finally hire.
The interview gives a personal touch to the interaction between the employer and the potential hire.
It helps evaluate a few necessary elements that can’t be evaluated at any previous step such as confidence level, dressing sense, and interpersonal skills.
After the interviews are over, you will have finally selected the ones whom you’ll offer the job to.
Onboard The New Hire
Did you think extending the job offer is the last step in hiring the right accountant for your firm? No, it isn’t—onboarding is as important as any of the previous steps.
Who doesn’t want committed employees? An effective employee onboarding process does that for you.
If you have an effective onboarding system in place, you help your new hires feel 18x more committed to you.
An effective onboarding process includes but is not limited to:
- Blending the new hire into the organization’s culture
- Explaining the mission and vision to them
- Introducing them to their colleagues
- Providing them the essential work-specific documents
- Teaching them the necessary processes and activities
3.) Embed A Culture Of Communication
Embed a culture of effective and clear communication. Start instilling it from your new hire, accountant.
Sit with your accountant and have a detailed exchange of ideas about building a strong financial foundation for your business.
Realizing the importance of communication in financial matters, establish regular communication channels for updates and discussions. You can set up the following channels:
- Emails, texts, or phone calls for urgent matters
- Scheduled meetings
- Cloud-based accounting platforms for real-time collaboration on financial matters
The communication channels would be of no use if the queries are not responded to promptly. So make sure to respond to the queries promptly.
Embed this communication culture company-wide as a building block of a strong financial foundation.
4.) Do Strategic Financial Planning
Establish long-term financial goals and create a financial roadmap for your business in collaboration with your accountant.
Strategic financial planning requires an accountant’s insights as they are constantly sitting at the numbers side of your business.
They will help you develop a realistic budget and make financial projections.
Since they better know the financial health of your business, they can identify growth opportunities and provide you with expansion plans as well.
Many of your business’s core decisions depend on financial data and forecasting.
For instance, how do you know what product to discontinue? And what product to produce more?
A managerial accountant provides data about a product’s performance in numbers, which helps decide whether to continue or discontinue a product.
They also determine the quantities and prices at which a product reaches breakeven and starts earning profits.
Simply put, the right accountant, with their useful insights, helps create a strategic financial plan for a business which is another building block for a strong financial foundation.
5.) Ensure Effective Bookkeeping
There are multiple accounting standards globally, and bookkeeping practices vary according to each.
That’s why a business must determine what accounting standard(s) it will follow. It is one of the elements of a strong financial foundation of a business.
Since an accountant possesses more knowledge of these standards, they can better advise which one to use and when to use.
The decision to choose one or more would vary depending on the geographic presence and operations of a business.
These standards guide the making of financial reports, which are later used by investors, governments, creditors, and sometimes customers.
They expect a standardized format followed by other businesses in that region, so a business must do the expected financial reporting.
Mostly, it is also required by the state’s mercantile law to follow a certain accounting standard when reporting in that state.
6.) Monitor Financial Performance
As another building block of a strong financial foundation, develop a habit of regularly and rigorously monitoring your business’s financial performance.
You should accompany an accountant to assist you with that. Initially, there are few cash inflows and outflows, which are quite easily understandable.
As your startup grows, these financial numbers start becoming complex, and you need an accountant to interpret them for you.
As a foundational block, set the key performance indicators (KPIs) for your products and services. Regularly, monitor your offering’s financial performance against these KPIs.
This continuous watch helps you make the best, timely decisions. If the KPIs are indicating over-performance, it may be time for your business to expand. If they indicate underperformance, you may need to make some changes.
Right Accountant For A Strong Financial Foundation
The right accountant is the one knowing most about your business’s financial matters.
They help you extract useful insights from complex numbers which are helpful for strategic financial planning of your business.
Not only do they assist you in understanding the financial figures, but they also legally save you money while taxation.
But that’s not all about them. They help you build a strong financial foundation which is critical to ensure the long-term survival of a business.
This article explained how they do so, and how to find the right accounting who knows the right building blocks to place.