Why Finance Should Be the Heart of Every Business

At growthCFO, we consider the data in everything that we do. We always try to make decisions based on data and on the reports that we have, especially in regards to finances and operations. Finance and operations are data driven. The reports that we create identify problems in performance or issues that clients might have. It lets us know when we need to hire, how much time we have to hire, and how many people we need to hire. It also allows us to hire the best candidates so our operations can continue to move forward smoothly, efficiently, and effectively.

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Finance is the heart of the business, not only a reporting tool. Too many businesses use finance as a support department to help with reports and other obligations that need to be fulfilled for the company. However, finance is really hand in hand with operations and the overall business, and should be very operationally and commercially focused. Otherwise, it won’t impact the growth of the business.

Why Finance Is So Important To Your Business

If you have finance as the heart of the business, people might wonder why. Is it to make money? The answer is no. Our “why” is to become the best data-driven creative testing agency. Unfortunately, in this world, cash is king. Without it, you can't do anything. So we need it, but it isn’t our why. Cash is like fuel in a car. If the car has everything it needs to reach its destination, which is the why, it won’t make it without fuel. This is why finance needs to know the business inside out, operationally, commercially, and financially.

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Finance also ensures that all departments comply with obligations and legalities. They’ll make sure that you have enough fuel to reach your final destination. Otherwise, even if you have an excellent plan to move the company forward, without the cash, you can’t go anywhere. You can’t put your plan into action, and you can’t reach your final destination. You can’t reach your why.

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For this reason, you should have finance at the heart of the business to maintain the financial health of the business. That doesn’t mean you should put so much focus on being a financial controller. The role of the financial controller is to control costs, and focusing too much on controlling costs will hurt growth. What you need is a balance between having the right budget for each team and making sure that each team is profitable. That’s how you grow. That’s how you achieve and maintain the financial health of the business.

Using Financial Data To Make Better Business Decisions

By effectively combining finance, operations, and the commercial side of your business, you can grow in a more sustainable way. Companies that only use financial reports as historical data are missing the operational data, which makes it difficult to make good decisions on investments or determine what the impact on ROI will be.

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If you have an operationally and commercially focused CFO or finance department, you can make better decisions on salary and benefits packages for each employee that align with your targets and the company’s targets. You will also be better positioned to attract new clients, grow your company, and ensure a positive ROI.

Divvying Up Your Financial Budget

Every department in the company needs a budget, but it can be hard to figure out how much money goes to each department. Without the oversight of finance, marketing could be overspending, but sales might be lagging because they don't have the relevant people. Maybe the sales department isn’t lagging, but the operations team is lacking the people or doesn’t have the right people to keep up. They don’t have the money to pay people the competitive salaries that they need, impacting the caliber of employees they’re hiring. Because departments are always evolving, a look at financial data to see how to best divvy up the budget amongst departments is crucial. When finance connects to all the other departments, they can see the big picture and develop a plan that encompasses all departments to ensure growth for the company.

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We’ve had teams request that a client paying X amount of money per month switch to assets that cost 1.5 X a month. This is where finance comes into play. We’ll check the data and the budget to make sure clients don’t end up losing money. Finance is truly the glue that connects all the other departments and makes sure that they have everything they need from a budget standpoint. They make sure all the departments align together, so we can have smooth growth for the business and ensure that all departments have the equipment, resources, and skills they need to accommodate the client's demand.

Good Debt vs. Bad Debt

Finance is essential for growing your business. Many people perceive debt as a bad thing, but it doesn’t have to be. If, for example, you take out a loan with 5% interest and you make more than 5%, you are ahead, right? Having access to debt like this can help you grow with other people’s money. You can use their money to your advantage so you can make money. In other words, the money works for you instead of you working for the money.

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Finance can help you by acquiring good debt, such as buying assets or investing in certain areas that you know are going to provide a positive ROI. This is especially important if you can't raise money yourself. Debt is much cheaper than equity in the long run.

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You need to be careful, though. If you are overpaying or if your spending is hurting the financial health of the business, you might end up taking a working capital loan that you can't afford. This could prompt you to get another loan to close the previous loan. This is bad debt that is not sustainable.

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Some people don't want to give up equity in their company because that might be expensive down the road. Some might want to acquire debt, but they don’t know how to. They don’t know what the best rate is or what would have a positive ROI in the investment they are going to make. Finance can help them by creating a growth model, determining what percentage of return they need, and what the ROI of the investment will be. If the ROI is positive, then they can move forward with the investment. If it's not, then finance can recommend that they don’t go with that debt.

Allow Finance To Be The Heart Of Your Focus

Putting finance at the heart of the business allows you to connect all the dots, have the business work in harmony, grow faster, and substantially reduce setbacks. By analyzing the data provided by all the departments, finance can design a master template, a master data budget, or a growth plan to make the right decisions that can help you effectively grow the business.

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