4 Tips on Managing Costs When Growing

Rose Report: Issue 57

By Ted Rose, CEO Rose Financial Solutions

Every successful company experiences growing pains. In fact, according to a 2021 Wakefield Research  study , 42% of growth company executives surveyed stated that scaling their business was more challenging than the start-up phase. While rapid business expansion is practically every business owner’s ambition, it can spiral into a disaster if not handled carefully. Therefore, having the processes and procedures in place to maintain a close check on your bottom line is crucial.  

Tip 1: Become a data-driven organization

Data is everywhere in today’s information-driven world. It is, however, of marginal value unless it is analyzed and transformed into actionable insights. The key to managing rapid growth is connecting your financial, accounting, and business data into a comprehensive system that offers a detailed view of your organization’s financial health. Accounting systems that generate financial statements, project reports, department reports, KPIs, ratios, and other financial information can help you fully understand your company’s profitability, cash flow, and enterprise value. Traditionally, this type of solution has been limited to ERP implementations for large organizations. However, new technologies make this possible for smaller companies that need to scale quickly to meet growing demands. 

Tip 2: Implement a cost management strategy

As companies grow, so do their expenses which often lead to a cash flow crunch. When companies experience rapid expansion, operations often become cash-intensive, necessitating careful cash management and financial decisions based on both actual and anticipated growth. Calculate your cash runway and burn rate to determine your future cash requirements. Analysis of your cash inflow and outflow will provide insights into your company’s growth and profitability and indicate whether you need to cut expenses or seek alternative funding.

Tip 3: Automate to streamline processes

The burden on an accounting department also increases when a company is growing. Without a robust accounting system, businesses will face several difficulties, such as processing additional personnel on payroll, paying invoices by hand, and handling permissions. As you expand your business, manual accounting processes become more taxing and less efficient, and making sound financial decisions will be more challenging. 

Tip 4: Know your numbers

The biggest takeaway, make sure you are a student of your numbers. By doing so, you’ll be able to track your KPIs versus your targets quickly. Inflation, market fluctuations, and supply chain issues can all have a significant impact on business outcomes. Reviewing financial reports, including KPIs, on a weekly and monthly basis allows you to quickly identify when you’ve drifted off course so you can make minor adjustments to get back on track to growing your business.

Don’t let your accounting software give you growing pains. RFS’ Finance as a Service (FaaS) is a cost-effective, scalable solution that grows with your company and provides the advantage of an ERP without abandoning your current accounting and finance system. Please schedule an introductory call for more information on our FaaS solution. 

This content is for information purposes only and should not be considered legal, accounting, or tax advice or a substitute for obtaining such advice specific to your business.