When Does Your Business Need a Better Finance Function?

Most businesses don't start with a finance function.

They start with somebody raising invoices, the owner checking the bank account and a bookkeeper or accountant making sure the necessary records and returns are completed.

And for a straightforward business, that can work perfectly well.

The problem comes when the business changes but the way its finances are managed doesn't change with it.

More customers, employees, suppliers, transactions and financial commitments create more complexity.

Eventually, the question stops being simply:

“Is our bookkeeping getting done?”

It becomes:

“Do we have a finance function that gives us reliable information and keeps everything under control?”

What Do We Mean by a Finance Function?

A finance function doesn't necessarily mean employing a Finance Director and building an accounts department.

It's simply the collection of processes and people responsible for the financial side of the business.

Depending on the company, that might include:

• Bookkeeping

• Sales invoicing

• Supplier payments

• Credit control

• VAT returns

• Payroll information

• Cash management

• Management accounts

• Financial reporting

• Year-end accounts and tax

Some businesses employ people internally to do these things.

Others outsource some or most of their day-to-day finance work.

And many use a combination of internal staff, technology and an external accountant.

There isn't one correct structure.

What matters is whether it works.

Why the Finance Function Often Gets Left Behind

Businesses rarely grow in a perfectly organised way.

A process that worked when there were five employees gets stretched to accommodate ten.

The owner continues approving every payment.

An administrator takes on invoicing because somebody needs to do it.

The external bookkeeper deals with Xero.

The accountant handles the year end.

Another employee maintains a spreadsheet because the information they need isn't readily available elsewhere.

Individually, none of these decisions is necessarily wrong.

The problem is that nobody ever consciously designed the overall finance process.

It simply evolved.

Eventually, responsibility can become fragmented and the owner ends up filling the gaps.

Sign 1: You're Not Confident the Numbers Are Right

This is one of the clearest warning signs.

You can log into Xero.

You can run a profit and loss report.

But you're not entirely confident that what you're looking at is correct.

Perhaps you know transactions haven't been dealt with.

Maybe the bank doesn't reconcile.

Or you've previously found errors that made you question other parts of the accounts.

Financial information isn't particularly useful if you don't trust it.

That's why good financial reporting has to start with reliable bookkeeping.

Sign 2: Too Much Finance Work Still Sits With the Owner

Owners should understand their numbers.

That doesn't mean they should personally process every part of the finance function.

If you're regularly spending time:

• Chasing invoices

• Checking whether bookkeeping has been completed

• Correcting transaction coding

• Raising routine sales invoices

• Finding documents

• Updating finance spreadsheets

• Answering basic bookkeeping queries

then it may be worth asking whether you're still the right person to be doing that work.

The objective isn't to disconnect the owner from the finances.

It's the opposite.

The owner should spend more time understanding the financial information and less time producing it.

Sign 3: You Only Really Know the Result at Year End

Annual accounts are important, but they're historic.

If you only get a proper view of profitability when your year-end accounts are prepared, you may be learning about problems long after they occurred.

That might have been adequate when the business was smaller and relatively simple.

As the amounts involved increase, the delay becomes more significant.

This is where management accounts and regular financial reporting can help.

They don't need to become a huge monthly reporting exercise.

The aim is simply to have reliable information frequently enough for the decisions the business is making.

Sign 4: Nobody Clearly Owns the Finance Process

Who is responsible for making sure your financial records are complete?

Who notices if an invoice hasn't been raised?

Who checks the bank reconciles?

Who reviews the balance sheet?

Who follows up when something doesn't make sense?

If the answer changes depending on the question, the finance function may have become fragmented.

This is one of the advantages of bringing bookkeeping and accounting together.

There can be clearer responsibility for the information from the day-to-day records through to the reports and accounts produced from them.

Sign 5: You're Making Bigger Decisions With the Same Information

A £20,000 decision in a small business can be significant.

As a business becomes larger, decisions involving tens or hundreds of thousands of pounds can become relatively normal.

Recruiting several people.

Taking another premises.

Buying equipment.

Borrowing money.

Changing pricing.

Opening another location.

The decisions become bigger, but sometimes the financial information behind them hasn't changed since the business was much smaller.

This is often where a better finance function starts to become valuable.

Not because an accountant should make the decision for you.

But because better decisions are easier to make when you understand the financial position you're making them from.

Sign 6: You Have More Reports, but Not More Clarity

Modern accounting software can produce enormous amounts of information.

That's not the same as having useful information.

Xero can produce reports instantly. Dashboards can display dozens of KPIs. AI can analyse financial data and generate explanations.

All of that can be useful.

But the starting point remains the same:

Are the numbers reliable, and do you understand what they're telling you?

Good management accounts shouldn't simply give you more reports.

They should help you identify what changed, why it changed and what deserves your attention.

Sign 7: Your Accountant and Bookkeeper Feel Like Separate Worlds

This is common.

The bookkeeper processes the transactions.

The accountant appears once a year to prepare the accounts.

Queries move backwards and forwards.

Adjustments are made at year end.

Then the process starts again.

There is nothing inherently wrong with using separate providers.

But if the year-end accountant regularly has to correct or rebuild the bookkeeping before they can prepare the accounts, that's inefficient.

The same records ultimately feed everything.

Bookkeeping, VAT, management information, annual accounts and tax shouldn't feel like completely unrelated processes.

Does a Better Finance Function Mean Hiring More People?

Not necessarily.

Sometimes hiring internally is exactly the right answer.

A business with enough ongoing finance work may benefit from its own bookkeeper, management accountant or wider finance team.

But employing somebody isn't the only way to improve the function.

Technology can automate more of the processing.

Responsibilities can be clarified.

Existing processes can be improved.

And businesses can outsource parts of the finance function rather than building every role internally.

The appropriate answer depends on the size and complexity of the business.

Where Does AI Fit?

AI will increasingly become part of normal finance processes.

It can help process information, identify anomalies, analyse reports and make financial information easier to interrogate.

We see that as an opportunity rather than a threat.

The best finance functions should use technology to remove unnecessary manual work.

But automation doesn't remove the need for reliable accounting information.

An AI tool analysing an inaccurate Xero file simply gives you a faster analysis of inaccurate numbers.

Technology makes information easier to produce.

Experienced accounting input helps make sure that information is worth relying on.

What Should a Good Finance Function Actually Give You?

The answer doesn't need to be complicated.

For most established owner-managed businesses, you should be able to expect:

• Accurate and up-to-date financial records

• Clear responsibility for finance processes

• Important reconciliations completed

• Accounting and tax deadlines dealt with

• Useful financial information when you need it

• Somebody investigating things that don't look right

• Technology being used efficiently

• Access to experienced people when judgement is required

And most importantly:

you should have confidence in the numbers you're using to run the business.

Your Finance Function Should Evolve With Your Business

There isn't a particular turnover at which every business suddenly needs a different finance structure.

A straightforward £2 million business may have relatively simple finance requirements.

A complicated £750,000 business may need considerably more support.

Complexity matters.

So does the number and size of the decisions being made.

The important thing is not to assume that the finance setup that worked five years ago must still be the right one today.

As the business changes, the finance function should change with it.

That might mean better bookkeeping.

It might mean more regular financial reporting.

It might mean bringing more of the finance work together.

Or it might mean building an internal finance team.

The right finance function is the one that gives you reliable information, clear responsibility and the level of support your business actually needs.