How to run a finance department
It’s not enough to just keep the books straight or keep track of expenses when you run a finance department. It’s about making the financial foundation of your business strong enough to support growth, make sure you follow the rules, and give you clear answers when you need to make important decisions.
If you’re creating a finance function for the first time or trying to improve an existing one, knowing how it works, what its duties are, and what tools it uses can make a big difference. A good finance department doesn’t wait for problems to happen; it plans for them. It doesn’t just give you numbers; it tells you what they mean.
This guide tells you everything you need to know about running a finance department well. We’ll go over the basics that keep finance teams efficient, accurate, and strategic, from defining roles and responsibilities to using the right technology and staying ahead of changes in the law.
What does a finance department really do?
The main job of a finance department is to keep a business’s finances in good shape. But that responsibility includes a number of important tasks that keep things running smoothly.
Bookkeeping and Accounting
This is the base. It’s important to keep accurate records of every transaction, whether it’s a sale, purchase, payroll entry, or expense. For tax returns, audits, and making decisions, it’s important to have clean books.
Financial Planning and Analysis (FP&A)
FP&A teams use past data to come up with useful insights. They help leaders understand what’s coming next by making budgets, predictions, and models of different situations.
Compliance and Reporting
The finance department makes reports, tax returns, and financial statements for stakeholders. They also make sure that the business follows the rules set by the government, the industry, and its own policies.
Managing Cash Flow
It’s very important to keep an eye on cash flow. Companies that make money can still go out of business if they run out of money. The finance team keeps the business going by keeping an eye on receivables, payables, and cash flow.
Managing Risk
Another important job is to find financial risks, such as changes in currency values and exposure to credit. Finance teams come up with ways to lower these risks and keep the company’s assets safe.
Putting Together the Right Structure for the Finance Department
The size and organization of your finance department will depend on how big and complicated your business is. A small business might only need one finance manager to handle everything, but a manufacturing company might need a whole team with different roles.
Roles that are common in a finance department
Chief Financial Officer (CFO)
The CFO is in charge of all financial matters. They work closely with the CEO and board to make decisions about the company’s finances, deal with investors, and plan for the future.
Controller
The controller is in charge of the daily accounting tasks. They make sure that financial records are correct, oversee audits, and make sure that rules are followed.
Manager of Finance
In smaller companies, the finance manager is often in charge of a lot of things, like budgeting, reporting, and managing cash flow. They connect strategy and accounting.
People who look at money
Analysts look closely at the numbers. They write reports, run models, and give business leaders information that helps them make decisions. Their work helps both the CFO and the leaders of operations.
Accounts Clerks for Accounts Payable and Receivable
These people on the team are in charge of bills, payments, collections, and working with vendors. They make sure that the financial transactions go smoothly.
Payroll Specialist
Payroll experts make sure that employees get paid on time and correctly. They also take care of tax withholdings, benefits deductions, and following labor laws.
Chart of the Finance Department’s Organization
A finance department might look like this:
- CFO in charge
- The CFO gets reports from the Controller and Finance Manager.
- The Controller or Finance Manager is in charge of Financial Analysts, AP/AR Clerks, and Payroll Specialists.
This structure makes things easier for small businesses. One finance manager might also be in charge of the controller’s duties, while one or two support staff handle payroll and transactions.
You might also see cost accountants in manufacturing companies who work on product costing, inventory valuation, and margin analysis. These are all important jobs for businesses that make things.
Important Tools and Technology
To run a finance department well, you need the right tools. You can only do so much with manual spreadsheets. Buying the right financial software saves time, makes fewer mistakes, and makes things easier to see.
Accounting Software
QuickBooks, Xero, and Sage are all examples of platforms that can help you keep track of your books, send invoices, and make financial reports. They handle tasks that need to be done over and over again and give you access to your financial information in real time.
Systems for Enterprise Resource Planning (ERP)
ERP systems connect finance with other business functions, such as supply chain, HR, and operations, for bigger companies. Some examples are Microsoft Dynamics, SAP, and NetSuite.
Financial Planning and Analysis Tools
Teams can use tools like Adaptive Insights, Anaplan, or even advanced Excel models to make budgets, run forecasts, and plan for different scenarios.
Expense Management Software
Programs like Expensify or Concur make it easier to keep track of expenses and get reimbursed, and they also make it easier to follow the rules and keep track of audits.
Payment and Banking Systems
Online banking sites, payment processors like Stripe, and tools like Bill.com make it easier to manage cash and pay vendors.
The size, industry, and complexity of your business will determine which tools are best for you. The goal is to reduce manual work, increase accuracy, and free up your team to focus on analysis and strategy.
Best Ways to Run a Finance Department
Structure and technology are important, but what you do every day is what makes you successful. These are some best practices that help finance teams do their jobs well.
Make a budget that makes sense.
You don’t just budget once a year. It’s a document that changes over time and helps with spending and resource allocation. Get department heads involved in the process to make sure everyone is on board and the information is correct.
Make Predictions Often
Don’t wait until the end of the year to look at your finances again. Update forecasts quarterly—or even monthly—to reflect changing conditions and new information.
Keep your internal controls strong.
Internal controls stop mistakes, fraud, and wrong financial statements. Separate tasks, get permission for big transactions, and do regular reconciliations.
Put first Clear Communication
Finance teams need to turn complicated data into insights that people who don’t work in finance can understand. Use pictures, dashboards, and simple language to get your point across.
Use automation when you can
Automation cuts down on mistakes made by hand and gives you more time to do more important work. Use automation to handle invoices, approve expenses, and make reports whenever you can.
Keep things in order
Make sure you have a set way to close the books, write reports, and handle audits. Write down workflows so that one person doesn’t have all the information.
Invest in Your Team
Soft skills are just as important as technical skills in finance. Teach your team how to use new tools, support their professional growth, and create an environment where everyone is always trying to get better.
Compliance and Regulatory Considerations
You have to follow the rules. Finance departments have to deal with a lot of different tax laws, accounting standards, and rules that apply to their industry.
Know How Your Accounting Works
In the U.S., most businesses use Generally Accepted Accounting Principles (GAAP), and around the world, they use International Financial Reporting Standards (IFRS). These frameworks tell you how to record and report transactions.
Keep track of your tax obligations.
The rules for taxes change a lot. Make sure you’re following all federal, state, and local tax rules by working with a CPA or tax advisor. To avoid fines, file your returns on time.
Get ready for audits
Getting ready is important for any kind of audit, whether it’s an internal, external, or regulatory one. Keep your records in order, write down how things work, and deal with problems before they happen.
Keep an eye on rules that are specific to your industry.
Some industries, like healthcare, finance, or manufacturing, have their own rules for compliance. Stay informed about regulations that apply to your sector.
How do you know if your finance department is doing a good job? Key performance indicators (KPIs) are measurable standards.
How do you know if your finance department is performing well? Key performance indicators (KPIs) provide measurable benchmarks.
Days Sales Outstanding (DSO)
This number tells you how long it takes to get paid after a sale. A lower DSO means that cash flow is better.
Days Payable Outstanding (DPO)
shows how long it takes you to pay your bills. Finding a balance between DPO and DSO helps you make the most of your working capital.
Difference in Budget
Look at how much you actually spent compared to what you planned to spend. Large differences could mean that there are problems with forecasting or spending discipline.
Timeline for the Financial Close
How long does it take to close the books each month? Faster closes improve agility and decision-making.
How accurate are financial reports?
Track the number of restatements or corrections needed. High accuracy makes stakeholders trust you.
Cost as a Percentage of Sales
Monitor how much it costs to run the finance function relative to company revenue. Efficiency gains should lower this ratio over time.
Trends in the Future Making Finance Departments
The finance function is evolving. Changing business models, automation, and AI are all changing the way finance teams work.
AI and automation
More and more, routine tasks like entering data, matching invoices, and reconciling are being done automatically. AI tools can look at big sets of data, find outliers, and even come up with new ideas.
Real-Time Reporting
Cloud-based systems enable real-time access to financial data. Leaders don’t have to wait for reports at the end of the month to make smart choices anymore.
Strategic Business Partnering
Finance teams are doing more than just crunching numbers. They’re becoming strategic advisors who help shape business strategy, evaluate investments, and drive growth.
Teams that work from home and in different places
The move to remote work has changed how finance departments work. Cloud tools and collaboration platforms make it possible to run finance functions from anywhere. .
More Pay attention to ESG
Environmental, social, and governance (ESG) issues are now being reported on in financial statements. Investors and other interested parties want to know more about how businesses are being responsible and sustainable.
Putting It All Together
To run a finance department, you need more than just technical skills. It needs the right tools, strategic thinking, and strong processes. The rules are the same whether you’re in charge of a small business’s finances or a big manufacturing company’s operations: they must be accurate, efficient, and in line with the company’s goals.
The first step is to make sure everyone knows what their job is. Make a structure that works for your business. Put money into technology that automates everyday tasks and gives you real-time visibility. Set up best practices for budgeting, forecasting, and following the rules. Use useful KPIs to measure performance. And keep an eye on trends that will change the way money works in the future.
A well-run finance department does more than just pay the bills. It also helps the company grow, keeps an eye on risk, and gives leaders the information they need to deal with uncertainty.
Business Kiwi can help you if you need expert advice on how to set up or improve your finance department. Our team has real-world experience and can help you find practical solutions that are right for your business. Get in touch with us today to find out how we can help you succeed financially.
