10 COMMANDMENTS FOR SME FUND MANAGEMENT- HOW TO DO IT BETTER

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Senior Finance Leadership/ CFO Service support

This is first thing , first. One person (necessarily a professional ) responsible for efficient financial management should be deputed , As this is a task , no body is doing in the company and whatever promoters are doing (there may be exceptions i have not come across) through their accountants is actually reverse of it. In my experience CFO service engagement works even better.

Senior Ex CFO’s are helping companies on financial management on affordable basis, through CFO services concept

Separate "Finance function" from "Accounts function"

We understand accounts function as finance function. Payment, recording of transaction and compliances are accounts part however Finance function would required budgeting , MIS and more of forward looking function

We can build a mature finance management system through Separate MIS’s on fund management, generally reviewed by such senior leadership and presented to management on periodical basis. Generally Accounts persons are not trained for this.

Better Manpower Planning of F&A function

This area is of immediate attention. Accounts deptt is generally a payment deptt. We have to recognise other functions through separate MIS’s I e Tax, Treasury , MIS, Finance, Secretarial and other compliances, and accordingly should be manned. Generally its not in good shape and needs immediate correction. We should allocated at least 15% of total employee cost budget . But the genesis of problem is that budgeting function is absent in Most of SME’s

Monthly BS closing and Fund Flow MIS's review

Preparing monthly BS is key to financial /Fund management. Monthly closing of books and it’s presentation to management should be ensured. Generally in SME’s , We prepare BS annually and that too in sep, next year. Fundamental of financial management is absent. It takes a senior leadership to make this happen

MIS automation

Excel preparation at the end of any period is cumbersome and generally will not work. It should be replaced by automatic reporting generated by accounting / Systems . Possible and easy if daily/ monthly book closing are adhered. CFO service guidance is a must for doing this.

One Pager MIS

MIS’s around finance management is not a pattern of working in SME’s, generally, because most of the time it is not summarised well. One pager MIS’s around fund management, working capital management and overall financial management needs to be discovered and adhered. It can’t be done in absence of strong finance leadership. Again CFO service can be a game changer.

Committee Structure for efficient fund management

Weekly discussion with key line-functions of the organisation is key for better finance management. Involving other HOD;s (Sales, Operation , Purchase etc ) will yield better results. Only a senior finance leadership can do this , again

Efficient working capital mgt

This is least understood (and done) part on the part of SME promoters. Changing payment terms with customers/ vendors, Factoring / Bill discounting , Marginal costing approach of pricing etc are game changer to long term finance management. Should be planned under due supervision of senior finance leadership

Monthly review of Next 3 Months cashflow vis a vis last 6 months columnar

A must and only possible if finance leadership is there. Accounts are to be closed monthly

Next 3 months cashflows are aligned to next 12 months cashflow and next 3 years

Apart from above , robust systems should be in place to tracks budget . Excel based working should be replaced with more mature system