Over the last two blog posts we’ve been exposing the accounting and finance problems many small businesses experience. This is the third in a four-part series before we explore the possibilities that come with solving those problems. 

The third major problem most small businesses face when it comes to the accounting and finance is the Capacity Gap. 

Fortune 500 companies have a CFO, a VP of Finance, and a VP of Accounting. This executive level team then has a Controller with a whole team of accountants and bookkeepers to support them in managing the business’s finances. 

This includes systematizing the whole accounting process, reporting financial data and statements to key personnel, performing analytics on the data to find meaningful patterns and indicators, and assisting with applying those patterns and indicators towards effective decision making. 

The reality is that your small business has the same financial information needs as the Fortune 500 company. 

Clearly the volume and complexity of your financial transactions are much less than a Fortune 500 company. But the same need exists for the systems, processes, and people to capture, format, report and analyze the relevant actionable financial data of your business.

Financial data is the language of business. 

Without accurate and timely financial data there is no means to analyze performance, predict outcomes, develop action plans and effectively communicate the status of your business. The same need exists for meaningful financial data no matter the volume and complexity of the data.

Once your business has grown beyond the micro-business stage (with one or two employees), it’s crucial to systematize your accounting so you are capturing the right financial data to effectively manage your business. 

Meaningful financial data allows you to objectively gauge the effectiveness of your team, performance of production equipment or technology, usefulness of materials, value of marketing and advertising, efficiencies of departments or locations, and determine how all these components come together.

Most small businesses can’t afford to hire the same level of talent and expertise as a Fortune 500 company. 

These small businesses face that capacity gap and have not come up with a way to narrow or eliminate the gap. 

This causes a lot of uncertainty for the business and the owner(s).

  • Uncertainty on exactly how to set up the accounting systems and processes to capture the key financial date
  • Uncertainty about exactly what key information you need to capture
  • Uncertainty about how often you should be reviewing and analyzing the financial reports and KPIs (key performance indicators)
  • Uncertainty about how to interpret those KPIs and apply those patterns into effective decision making
  • Uncertainty about how to turn all this financial date into forward facing financial projections that help you see the financial future of your business as you implement growth strategies
  • Uncertainty about how to set specific financial targets and objectives, and then evaluate performance against those targets and modify plans and operations.

Stay tuned. We are not trying to depress you by focusing on the problems. 

We know it’s critical to first understand the problems and then focus on the possibilities and how to cross the chasm between the two.