Growing Companies Must Manage Cash Flow and Internal Controls
If you run a rapidly growing company, you confront a host of challenges from financing your growth, to managing operations, to finding the right staff, etc. etc. Most growing firms really struggle with two financial issues: cash flow management and internal controls.
Cash Flow Management
Business owners of fast-growing companies quickly realize that they need a LOT of cash to keep a growing business humming. After celebrating large new clients, business owners discover that a burgeoning A/R will not pay staff or rent. They may need new staff and more office space to support new customers.
All of this takes money in the bank to pay for everything. Even when you implement the strategies we recommend in our blog post on improving cash flow, you may still need money.
Project Cash Needs to Avoid a Cash-crunch
Your best option is to stay ahead of a cash-crunch by carefully projecting your cash needs. You will encounter trouble if you look for cash only when you need it. You can use a cash flow projection to stay ahead of this issue. The following link provides information on how to create a 13-week flow projection.
If you need outside money, review our post on financing small business growth. You can also contact us. We have a lot of experience in working with growing companies.
Internal controls are processes a company uses to operate efficiently and to safeguard its assets. You should put internal controls in place early in the growth process. If you wait until many years of rapid growth, you may risk financial disaster.
For example, don’t have the same person pay the bills, balance your checking account and review your bank statement. The business world is rife with stories of dishonest people with this much control taking advantage. In this case, you can do something as simple as having one person reviewing the bank statements and another person paying the bills.
We often see companies reach a growth peak without the right accounting and financial controls. Owners of these rapidly growing firms have been too busy with the growth to focus on back-office issues.
You should put proper controls in place as early as possible. Internal controls will make sure that your company operates efficiently and effectively. Proper controls also ensure you have reliable financial reports and your systems comply with legal requirements.
Internal or External Accounting Staff
As you grow, you will need to expand your accounting staff. You will need people to handle:
- General bookkeeping (A/R, A/P, bank recs, etc.)
- Financial reporting (analysis and forecasting)
- Payroll and benefits management (401Ks, SEPs, etc.)
- Tax Issues, etc.
You have two options. You can hire an internal accounting professional or out-source your accounting needs.
An internal accountant will give you more flexibility and control of your accounting. An in-house accountant will require a high salary in the Washington DC area. If you want to hire a CPA, an experienced accountant in Virginia expects a salary of $90,000+.
If you do not have the need for the skills an experienced CPA can provide, you can outsource the bookkeeping and/or the CPA functions to outside companies. Outsourcing either the bookkeeping or CPA functions can cost less than a full-time staff member. You will lose a little flexibility if you outsource these functions.
Please contact us if you want to discuss the option of outsourcing your bookkeeping or CPA functions.
Good luck with your growing company.