I’ve always been a ‘what’s next’ guy - especially in my career.

If you’re anything like me, you want more.

Every finance professional naturally goes down the same path 90% of other finance professionals are heading - where your goal is to execute your finance job with excellence.

or

They can choose the rare, value-added finance path - where your only mission is to drive value in the business.

To be clear, neither is right or wrong. And you can build a successful finance career doing the first.

But if you want to advance a little faster, make more impact, and feel more fulfillment, keep reading…

To make a statement calling out something as “value-added finance” implies there is something that is “non-value-added finance”.

So what is the difference?

This goes back to a controversial take that I maintain that finance is a cost center.

We don’t sell anything.
We don’t directly make money.

We may find creative ways to save money or challenge the business to unlock some value (more on this in a bit), but we’re not inherently a value creation arm of the business.

Sales and fulfillment are. That’s it.
Sales and marketing create demand and capture demand.
Fulfillment makes and delivers the thing for the customer.

Everything else in a business is necessary (HR, Finance, Accounting, etc.) but the goal of these departments is to be as lean as possible and save money, not to expand with the business (they are simple operating expenses).

Each of these can (and should) add indirect value to the business that eventually manifest as value for the owner or the business.

And in finance, there are 5 unique things we can do to drive this indirect value:

Let’s talk about each and how they drive value for a business:

Cash (flow) is king in a business.

Especially in smaller businesses where growth requires investments - or bets - that will pay off later.

Managing cash becomes less important as you mature as a company - or at least it becomes an optimization exercise rather than a matter of survival.

The finance world wants you to believe managing cash is a top-secret level of trickery. But in reality, it’s as simple as managing your own cash in your personal life.

Truly, to do this right you need to forecast cash. But not everybody needs a 13 week cash flow.

If you’re in a spot where cash is tight or you’re about to make a big purchase: daily cashflow forecasting and tracking.

If you’re in a spot where cash is good but you’re pushing on growth (30%+ revenue growth rate): weekly cash forecasting and tracking.

If you’re growing a little slower or have massive cash reserves: monthly cash forecasting is probably enough.

Here’s a simple illustration to better understand how businesses mature in terms of profit clarity and management:

For SMB or lower, a standard QBO report will work.

But once you want to make better investment decisions and reap the rewards of fine-tuning your profit decisions (where every $0.01 saved per revenue dollar is millions in profit), you’ll keep driving profit down to the customer level.

This one is bit more squishy. (hard to quantify)

But you know it when you’re in it.

And a great finance partner who’s ‘been there, done that’ will be the greatest asset when it comes to decision confidence.

Frankly, it’s the reason I preach about forecast accuracy.

Your ability to predict the future (and be mostly right) will help executives make better and more confident decisions.

BuT WhAt AbOuT WhEn ThInGs ChAnGe AnD BrEaK YoUr FoReCaSt??

Of course, you won’t always be right (nor should you try 100% of the time).

So your secondary skill that’s critical to leverage is your ability to explain why your forecast was off.

And sometimes it’ll be “oops, finance missed something”.

But you’ll get points if the answer is “this thing happened in the market or internally that wasn’t apparent, but we caught it early because our forecast missed by 1% last month and made us look into it”.

That will bring confidence to the business when making decisions.

I’ll make this one quick since we’ve already covered it a few times.

But a great finance partner can not only forecast what will happen with results, they will also be supremely skilled at hearing what business leaders want for/from the business and translating that to goals.

It’s what I call the scorekeeper part of the job.

We see everything, so we need to focus the business on where we think the soft spots are for pushing on either growth or profit.

Everything we’ve talked about ladders up to this.

But working in PE-backed and F100 companies for so long, I’ve lost an appreciation for the fact that this is embedded in everything I do in finance.

Not only is our job to extract the maximum amount of value out of the business every month (short term gains), but it’s also to ensure the business is attractive to a long-term institutional investor (long term gains).

It’s a balance.

But it’s a balance that I think most smaller businesses ignore. They focus so heavily on how decisions will drive more short term growth or profits, but don’t focus on making the business an attractive investment for lenders or future investors.

I ran into this recently when I was helping a friend with a law firm fix his business finances.

He went from days of cash runway and no lenders wanting to touch his business - to monthly of cash runway and a line of credit to support growth and hiring.

Our goal was to tidy-up the business for the last 6 months so that it was attractive to the lenders.

It’s cool because that decision to “fix” the business led to better financing rates and options - meaning it both served his short term profit as well as created a more valuable company for him.

If you’re a business owner or finance executive looking for better finance for your business or team, reach out. Either we can help or we’ll find someone in our network who can.

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