What Are Financial Operations and Why Do They Matter?

Written by Sarah Dillon    |    Published: June 24, 2024

Sign up for our newsletter to receive everything from accounting advice to notifications on new tax laws.

Financial Operations: Two colleagues are having a conversation at a work desk.

There’s been a seismic shift in the world of financial operations. Remember how awful it was to deal with paper-based bookkeeping? Or how difficult it was to maintain a financial forecast in Excel?

Today, AI, technology, and human-powered services are delivering extreme levels of efficiency, accuracy, and cost savings across the entire range of complex, time-consuming tasks that fall under the financial operations umbrella.

These advancements have the potential to revolutionize how businesses manage their finances, capitalize on opportunities, and drive sustainable growth. But a shocking number of founders and leadership teams aren’t taking full advantage of the situation.

By sticking to outdated financial processes, they’re missing out on improved cash flow management, accurate financial reporting, and strategic resource allocation. Embracing modern FinOps can turn financial management from a back-office chore into a strategic advantage, propelling businesses forward in a competitive landscape.

Financial Operations Have Changed for the Better. But Businesses Are Still Missing Out.

The vast majority of SMBs and growing business we work with at Hiline have struggled to keep pace with these changes. Here’s why.

  1. Lack of Awareness and Expertise: Many SMBs are unaware of the latest FinOps technologies or lack the expertise to implement them effectively.
  2. Resource Constraints: Limited budgets and time often prevent SMBs from investing in new financial tools and processes, keeping them stuck with inefficient systems.
  3. Resistance to Change: Established businesses may be hesitant to overhaul their financial operations due to comfort with familiar processes and fear of disruption.

If your business still needs to get its financial house in order, don’t stress. The best time to optimize your business’s approach to financial operations is right now.

Let us show you how.

Understanding Financial Operations

Put simply, financial operations (FinOps) involve the comprehensive management of a company’s financial activities to ensure a business’s compliance and financial health.

FinOps helps businesses manage cash flow, monitor expenses and income, create budgets, engage in strategic finance, forecast financial needs, ensure regulatory compliance, and maximize returns on investments.

Key Components of Financial Operations

Although the key components involved in financial operations remain the same, each business needs to select the combination of financial operations tasks, tools, and workflows to create a FinOps system that will ensure efficiency and sustained long-term growth.

  • Bookkeeping. Recording and organizing financial transactions to ensure accurate and up-to-date financial records.
  • CFO Services (FP&A). High-level financial oversight and strategic planning including budgeting, forecasting, and financial management.
  • Strategic Tax. A strategy-first approach to tax, leveraging expert knowledge and year-round planning to maximize returns and ensure compliance.
  • Financial Reporting. Preparing financial statements and reports that provide insights into a company’s financial performance and health.
  • Budgeting and Forecasting. Setting financial goals, predicting performance, and allocating resources to plan for the future.
  • HR & Payroll. Managing payroll, benefits, and compliance with employment regulations while ensuring employee well-being.
  • Spend and Cash Flow Management. Monitoring expenses, optimizing cash flow, and making informed spending decisions.
  • Compliance and Regulatory Management. Adhering to financial regulations and standards to prevent legal penalties.

The Power of Financial Operations: A Tale of Two Businesses

Here’s a side-by-side comparison of what happens when a business optimizes its approach to financial operations versus what can unfold if financial operations tasks and systems are left unchecked.

 

SmartStart:

Efficient FinOps

ChaoticCorp:

Inefficient FinOps

Cash Flow Management

Maintains positive cash flow, ensuring liquidity and stability.

Struggles with cash flow issues, leading to liquidity crises.

Financial Reporting

Provides accurate, real-time financial insights for informed decisions.

Inaccurate and delayed reports, hindering decision-making.

Compliance

Adheres to all financial regulations, avoiding penalties.

Faces compliance issues, risking penalties and legal troubles.

Resource Allocation

Allocates resources strategically for growth and efficiency.

Inefficient resource allocation, leading to wasted funds and missed opportunities.

Decision Making

Uses data-driven insights for proactive strategy adjustments.

Lacks reliable data, resulting in reactive and suboptimal decisions.

Investor Confidence

Builds investor trust with transparent and accurate financial practices.

Struggles to gain investor confidence due to financial mismanagement.

Operational Efficiency

Streamlined operations with automated financial tasks.

Manual, error-prone processes that slow down operations.

Growth Potential

Well-positioned for sustainable growth and scalability.

Stagnates or declines due to poor financial management.

 

The Technological Shift in Finance Operations

AI, automation, and cloud-based technology have revolutionized FinOps. Here are some of the tools founders and leadership teams are using to reduce costs, increase efficiency, and stay competitive.

Accounting & Bookkeeping

Xero and Quickbooks Online make quick work of time-consuming bookkeeping tasks, providing instant access to critical financial data.

Budgeting & Reporting

Teams can use Basis FP&A software to develop budgets and forecasts via interactive dashboards and reports.

Invoicing & Accounts Payable

FreshBooks automates invoice creation, follow-up communication, and billing processes, ensuring timely payment while reducing administrative overhead.

Spend Management

Divvy helps leadership teams control company spending, allocate physical and digital spend cards to employees, and see where every dollar is being spent.

HR & Payroll

Gusto and JustWorks help teams navigate the complexities of human resource and payroll compliance.

Strategic Finance: A Strategic State of Being

Businesses that combine financial operations with strategic finance often experience a ‘firing on all cylinders’ that drives smarter decision making and faster growth.

Where financial operations help a business stay compliant, efficient, and in good financial health, strategic finance leverages financial data to help teams see into the future, make informed decisions, and achieve set goals as quickly and efficiently as possible.

With FinOps and Strategic Finance working hand-in-hand, businesses typically experience the following benefits.

1. Fewer Risks

Engaging in strategic finance can help businesses identify and mitigate potential risks, such as market fluctuations, economic downturns, and regulatory changes.

2. Profitability & ROI

With the right data and strategy in place, businesses can make smart, informed decisions about where to invest their resources to maximize profitability and growth.

3. Healthy Stakeholder Relations

Having a plan in place can demonstrate sound financial management practices and strengthen relationships with investors, creditors, and shareholders.

4. Competitive Advantage

Businesses can outperform competitors by leveraging financial insights, staying ahead of market trends, and effectively managing financial resources.

5. Increased Cash Flow and Capital

Optimizing receivables, payables, and inventory management can give a business access to healthy cash flow and the working capital it needs to meet operational needs and seize growth opportunities.

6. Long-Term Financial Sustainability

Balancing short-term profitability with long-term value creation can help a business weather economic fluctuations and uncertainties.

The Power of Your People: Why Skilled Professionals Matter in FinOps

Financial operations (FinOps) are not just about balancing books; they’re about creating a solid foundation for growth. That’s why it’s essential to have a team of experts managing and optimizing your financial operations as your business grows.

A comprehensive FinOps team brings financial and technological expertise, strategy, and a holistic approach to managing finances, ensuring every aspect of the business is aligned for success.

With a dedicated FinOps team, businesses can unlock their true potential and focus on innovation and growth, knowing their finances are in expert hands.

How to Integrate FinOps In Your Business

Follow these steps to successfully implement FinOps in your organization. By following these steps, you can transform your financial operations and drive your business toward long-term success.

  1. Assess Your Current Financial Operations: Conduct a full audit to identify inefficiencies and areas for improvement in your existing financial processes.
  2. Select the Right Tools and Software: Choose scalable and compatible financial tools that meet your business needs and support every FinOps task.
  3. Train Your Team: Make sure everyone knows how to get the most out of the FinOps tools and workflows you’ve introduced into the organization.
  4. Continuous Monitoring and Improvement: Regularly review and optimize financial processes to maintain efficiency and effectiveness.

 

Turn Your Financial Operations Into a Strategic Advantage

Imagine having a team that’s not just keeping records but actively working to improve your business’s financial health. They bring order to the madness, providing clarity, efficiency, and strategic insights that drive growth and stability.

That’s what you get with Hiline—a dedicated, expert team to handle your business’s financial operations, including strategic accounting, bookkeeping, tax, and fractional CFO services, all under one roof.

If you’re ready to unblock your financial operations and focus on other important areas of your business, get in touch and learn how Hiline can help.

Book some time to chat with a Hiline advisor.

Read Similar Articles

when to hire a cfo

Accounting

CFO Hiring Guide: How and When to Hire a CFO

when to switch accountants

Accounting

10 Signs You Need to Switch Accountants

Essential Questions to Ask a CPA

Accounting

14 Questions to Ask a CPA Before You Hire Them