Many SME business owners are unsure what is required to build a successful Finance Function for their business, as it is something they have not had to consider before.
For SMEs, creating a Finance Team for success is about getting the right resources in place as cost effectively as possible. Equally as important is ensuring the scope of work for those resources is clearly defined and tailored to maximise value to the business.
At a base level, there are 3 key roles required for most SMEs:
Bookkeeper
Tax Accountant
Chief Financial Officer (CFO)
(Noting as a business expands there may also be other roles required, such as Accounts Payable / Receivable staff or a dedicated Payroll Officer who works alongside the Bookkeeper).
Let's break down the roles of these 3 individuals and how they fit together:
Bookkeeper: key for ensuring accuracy and timeliness at the ground level. If errors are made when a transaction is first entered or when reconciling cash receipts or payments, this will impact the quality of information pertaining to the business. The Bookkeeper is largely dealing with matters of the past, rather than being forward-looking.
Tax Accountant: relies on the information from the work performed by the Bookkeeper. They ensure tax compliance is in order and will typically produce financial statements as part of preparing tax returns. The External Accountant is primarily focused on historical results; however, will also assist with tax planning.
CFO: performs a strategic role and is responsible for producing informative finance reports to the owners / directors of the SME. A CFO establishes and maintains governance, risk management, and ultimately helps the SME achieve its financial goals. The CFO is therefore concerned about not only the past, but also the present and the future. The CFO requires a deep understanding of the business, its pain points and how to unlock value and as such, it is recommended that SMEs choose a CFO that has relevant industry or sector experience.
To maximise effectiveness, the 3 individuals need to work in coordination with each other and should liaise frequently. Timely communication is considered key for a successful Finance Team.
Below is further detail around the duties and responsibilities typically performed by each individual.
BOOKKEEPER
Day-to-day bookkeeping including bill entry and accounts payable, sales invoicing and debtor collection, bank reconciliation, intragroup recharges;
Payroll preparation and processing, including Single Touch Payroll compliance; and
Month-end items such as recognition / release of accrued expenses, prepayments, unearned revenue, updating of leave provisions and provision for income tax, and balance sheet reconciliations.
TAX ACCOUNTANT (external)
Year-end Financial Statements;
Income Tax Returns;
Indirect tax returns, such as Business Activity Statements (GST and PAYGW), Payroll Tax Returns and Fringe Benefits Tax Returns;
May look after ASIC Compliance; and
Tax planning opportunities.
CFO
Appropriateness of the Accounting Tech stack;
Budgeting and Forecasting;
Financial Reporting and Analysis – ensuring accurate and reliable financials;
Cash Flow Management;
Establishing and maintaining strong Governance, including accounting controls;
Leveraging of data for more informed decision-making;
Key Performance Indicator (KPI) setting and monitoring to drive Operational and Financial performance;
Debt covenant reporting / covenant forecasting;
Risk Assessment and Mitigation;
Commercial issues / negotiations; and
Supporting a business through a growth / scaling up period.
The CFO can be either Internal or External to the business depending on its size. Often SMEs are unable to afford the cost of a full-time CFO, and in these instances, an Outsourced / Virtual CFO is a good option. Outsourced CFO service providers often package up and include bookkeeping as part of their service offering, which can result in greater cost efficiencies and a more streamlined service for the SME.
At Zealth Advisory, we are specialist providers of Outsourced / Virtual CFO services. Get in touch to explore how Zealth Advisory can help your business create a Finance Team for success.
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