A Simple 10-Item Scorecard to Rate Your Company’s Finance Pillar

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A Simple 10-Item Scorecard to Rate Your Company’s Finance Pillar

Each quarter, rate your company on a scale of 1-10 (with 10 being best) on each of the following aspects of your Finance Pillar:

Accounting & Reporting: How accurate is your basic accounting function? How timely do you close out your month in your bookkeeping? Timely and accurate financial information is a requirement to make sound business decisions. On a scale from 1-10 how strong is your Finance Pillar in this area?

Accounts Receivable (aka: “Collections”): What percentage of your receivables do you collect on? How long does it take you on average to collect on them (your “Receivables Cycle” in days)? Do you send out invoicing in a timely manner? How systematized is all this? Do you have simple controls in place to make sure that you’re tracking, billing for, and collecting the money you’re owed? Or do you have to manually wing it each month? On a scale from 1-10 how strong is your Finance Pillar in this area?

Accounts Payable: Do you have good payable’s approval process so you are protected from mistakes or misbehavior with payables? Is this a trusted process or a chaotic mess? On a scale from 1-10 how strong is your Finance Pillar in this area?

Budgeting and Forecasting: Do you know what your anticipated operational cost will be? Do you have formal budgets for them that you track actual to budgeted to see your delta? Or do you do this in an informal, fly-by-the-seat-of-your-pants manner? On a scale from 1-10 how strong is your Finance Pillar in this area?

Financial Controls: Do you have procedural controls that protect your business from poor or even intentionally fraudulent employee behavior? Do you have clear metrics that flag strange activity for you to look at closer? Do you have two or more parties in the flow of money to reduce the temptation for fraud? Do you have a clear audit trail? How about making sure that physical checks and purchase orders are under control with a log as to who controls which numbers? On a scale from 1-10 how strong is your Finance Pillar in this area?

Cash Flow Management: How well do you manage you inflow and outflow of money? Do you have a trusted process for this such as a rolling 120-day cash flow forecast? Or do you constantly have to scramble to find money to pay bills and cover payroll? On a scale from 1-10 how strong is your Finance Pillar in this area?

Tax Planning: Have you worked with a talented tax strategist to help you and your company legally minimize your tax burden? Do you do this well in advance of major business decisions, after the fact, only at tax time? On a scale from 1-10 how strong is your Finance Pillar in this area?

Debt Management: How well do you manage your lines of credit and other financing arrangements? Do you proactively plan for future cash needs now? Or only search for credit when you are in desperate need for it? On a scale from 1-10 how strong is your Finance Pillar in this area?

Managing by Margins: Do you keep a close look at your Gross Profit and Operating Profit margins? Your Cost of Goods Sold? And more importantly, do you use these valuable metrics to better manage your day-to-day operations? On a scale from 1-10 how strong is your Finance Pillar in this area?

Strategic Financial Decisions: Tying all of this together, how do you do at make smart, informed strategic financial decisions on things from pricing, to capital purchases, etc.? On a scale from 1-10 how strong is your Finance Pillar in this area?

Now that you’ve rated your company’s Finance Pillar on these 10 key sub-functions, ask yourself which ONE sub-function would most benefit your company to focus on improving over the next 90 days.

Then ask yourself, what three simple steps could you take this quarter to improve your score in this one sub-function by 1-2 points or more.

By breaking things down into bite sized chunks and doing this each quarter you’ll be amazed at the compounded growth your business will enjoy over the next few years.

Image courtesy of inc.com