As your business grows, your just might find that you’re outgrowing your financial practices. It’s one thing to start a company and manage your money the best you know how, but smart growth demands more. To help you guide your growing business to a better set of financial practices, we checked in with three growing companies for their best tips. They’ve been right where you are—looking to build a solid foundation for growth.
Here’s our trusted panel of C-suite executives—all of whom run companies ranging from $5 million to $30 million in annual revenue—and they’re happy to help share their lessons learned and best advice for keeping the cash flowing in your growing company.
What’s the biggest way you could have improved your company’s financial practices as a younger company?
DuPont: We would have ensured that our financial support team was familiar with our industry. In retrospect, we probably would have been better off had we started working with an accountant with Software as a Service (SaaS) company experience. Industry knowledge matters.
Khalaf: We should have put a greater emphasis on the metrics that drive business growth. We definitely would have benefited by using these in our financial decisions.
Miller: We didn’t challenge our receivables days as a younger company. We thought it would create issues with our customers. As we grew, we were forced to improve our receivables, which proved easier than we thought. It greatly improved our overall financial health and cash flow.
What financial practices do you wish you’d implemented sooner?
DuPont: I wish we had established and managed through departmental-level budgets. Pushing decision-making down to the lowest possible level, not just in the financial arena, is almost always a good idea. Doing so in the financial arena transforms behavior. People make tradeoffs instead of requests.
Khalaf: The creation of visual business intelligence dashboards. These dashboards have been key for our growth. They allow us to have a real-time view of whether or not we’re meeting our performance objectives, which helps us make informed business and financial decisions.
Miller: We wish we had shortened our receivables days sooner. This improved our cash flow to the point that we are now able to pay some vendors early to take advantage of early pay discounts for increased cost savings.
What one financial strategy has allowed your company more financial flexibility?
DuPont: We raised a little more money than we thought we would need in our earlier funding rounds. The extra runway provided was well worth the (slight) additional dilution and time invested.
Khalaf: We’ve gained flexibility and foresight by preparing a proactive forecasting model. This gives management time to address areas of opportunity, as well as capitalize on best practices.
Miller: Opening up a working line of capital with our bank allowed us to cash flow our growth.
What’s your top tip for smarter financial management of receivables?
DuPont: We are a subscription-based SaaS company. Our subscriptions are paid up front and automatically, which is always a plus.
Khalaf: Companies must develop metrics that are actively managed in respect to accounts receivable days outstanding. But measurements alone mean nothing without action. Companies must then actively and consistently follow up.
Miller: If your accounting team is having difficulty making headway, get other people within the organization involved. They may have contacts that can spur the process along. This should be a step in your process should receivables hit X number of days past due.
What advice would you give a growing company about shoring up their financial practices?
DuPont: Create unimpeachable financial records from the formation of the company. That means being scrupulously honest, following Generally Accepted Accounting Principles (GAAP) from the formation of the company, and producing and distributing regular financial reports.
Khalaf: Understand where the profitability of the business is coming from. Often, this isn’t where you’d expect, so don’t assume. You must truly do the work and understand the breakdown of profitability.
Miller: Ensure that you and your management team are looking at your key cash flow metrics and reviewing those metrics at least once a week.
How important is it to make the company’s financial status the entire company’s responsibility?
DuPont: People behave dramatically differently when they feel they are spending their money. I cannot overemphasize how important this is. Things get loose and expenses can easily spiral out of control when individuals feel they are spending someone else’s money.
Khalaf: The financial side of a business is often not widely understood, but it’s critical that the organization as a whole understand the performance metrics. This provides the context needed for all the team members to work on their individual parts with an understanding of the business goals.
Miller: This is something we consider integral to our success. We report on our financials at regular company meetings and form committees responsible for cleaning up any issues that are stalling invoicing. Managers regularly speak with their reports about how and what they need to do to help with both invoicing and collecting. This gives employees a stronger sense of impact and responsibility.