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Finance October 27, 2021

How To Harness The Potential of Your Finance Team

In 1954, Peter Drucker famously said that the business enterprise has two — and only two — basic functions: marketing and innovation. Yet here we are, in a world where finance is imperative. So let’s reconcile.

Finance: A Costly Function?

Finance stores (banking), accounts (accounting), and manages (treasury) the firm’s reserves as per regulatory guidance. If you want or not, finance allows marketing and innovation to exist in the first place. And on paper, the rough setup of a finance team should be quite similar in most companies.

However, the perceived importance of the finance function varies greatly. Some businesses spend up to 1.8% of their revenues to run finance, while others spend as low as 0.56% of their revenues. To put that into perspective: A company with €10M in annual revenues might “choose” to spend €125,000 more or less on their finance function. How come? Because founders and business owners often do not fully harness the potential of their finance teams.

Five Thoughts on Fixing Finance

Businesses invest a lot into the best talent, without levelling up their infrastructure. Imagine if Mercedes gave Lewis Hamilton a tractor to compete in the Formula 1. The same happens when employees are stuck with administrative and low-value projects.

Hence, let’s look at five scenarios that help you diagnose whether you’re harnessing the full potential of your finance team or leaving €€ on the table:

  1. Payments: Your Accounts Payables focus more on fixing data rather than improving supplier relations, hunting discounts, and finding the best possible businesses for you to partner with.

    📝 Level up by using a spend management tool or corporate credit card. Use multi-banking to seamlessly initiate payments across accounts. When transitioning your recurring payments from manual transactions to batch payments, choose an interface that allows seamless integration into accounting, bank accounts, and upload of payment files. Pro tip: Avoid anything that says EBICS if you don’t want to be stuck in the past.

  2. FP&A: Your Financial Analyst manually checks account balances and keys in data from several sources rather than creates ad-hoc financial analyses and recommendations.

    📝 Aim to have your reconciliations fully automated and use business intelligence from tools like Amplitude, Mixpanel, Mode, or Chartmogul to level up the work your financial analyst delivers. If you select a cash flow management and modelling tool, prioritise for ready-made graphs and Excel exports.

  3. Treasury: Your cash management delivers negative yields rather than improves your balance sheet. On top of that, you cross-check reference codes of cash receivables across bank transactions to align them with the bookings made.

    📝 Instead, have a manage your treasury to automatically monitor your bank transactions, sync your receivables, provide access to the lowest international payments fees, hedge your FX exposure from invoices (if any), and inform about your bank fees: Current deposit rates will charge above €50,000 in fees on €10M cash in the bank. Treasury will help you fix your cost of cash.

  4. Permissions: Your approval flows create bottlenecks. 99% of workflows in finance should go through auto-confirmations. If you need to approve all reconciliations or usual invoice payments, your finance function runs inefficiently.

    📝 Identify the use cases where a 4-eye principle is key. Examples are accrual accounting approvals, non-invoiced payments, or above-threshold expenses. When selecting your finance software, optimze for team and collaboration functionality.

  5. Management: Your finance function has an accounting role rather than a strategic advisor to the CEO role. Catching yourself saying “but my business is different” is not an excuse.

    📝 Save costs from auditors and accountants by investing in better accounting tools. Create a list with all the reports and KPIs that you measure today, and that you want to measure tomorrow — you’ll see how much transactional work is actually done without adding value.

Administrative burden creates opportunity costs for any finance team. Obsess over creating value from every task.

Five Thoughts on Fixing Finance

Banking and Cashflow Made Simple

Let’s come back to our €10M revenue generating business. A ~0.5–1% finance function spend means a maximum of two finance employees to cover all of the banking, accounting, and treasury. Luckily, there are modern finance tools, i.e. the Lewis Hamilton Mercedes equivalent, that help scale productivity without scaling costs.

At Airbank, we designed better finance by starting with creating a delightful banking experience. Airbank puts all your business bank accounts in a single interface, accessible for your team. Through our Accounting integrations with Sage, Quickbooks, Xero, DATEV, and others, adding invoices from your Stripe, Paypal, or Shopify transactions are fully automatable.

Managing Cashflow with Airbank

Airbank’s cashflow modelling library provides all the key KPIs needed to run and model a business, including run-rate analyses and excel reports. And for the proficient financier that wants to go above and beyond, Airbank Treasury helps transform negative yields from, sub-zero deposit interest rates in many European banks into positive yields.

With Airbank, finance runs on autopilot, so that your business can scale seamlessly. And with finance moving into a strategic and innovative, rather than transactional function, even Peter Drucker would approve.

Airbank allows you to connect your bank accounts, which auto-categorises all your historic transactions. In addition, you can also initiate new payments and have them categorised for your cash flow statements from the get-go as well. Airbank then produces your direct cash flow statement for you in real-time and even lets you input your cash flow forecast numbers in the spreadsheet based on your planned billings.

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