A common error that strangles business growth

23rd January 2019

“We didn’t want to scale every other area of the business but not our finances – it would strangle the business.”

It’s been a year since we started working with one of our clients, IMMJ Systems.

When I recently caught up with their CEO, Michael van de Weg, to look back on the past 12 months, he uttered this insight to me, which I thought deserved a wider airing.

You see, so many companies grow and grow….

…Dealing with more customers, suppliers and staff, and delivering a more complex range of products and services….

….And then all of a sudden, they realise that their financial management is no longer fit-for-purpose.

It hasn’t grown with them, and they find themselves struggling to control their cash flow, to manage their day-to-day financial operations and to understand where their company really stands financially.

IMMJ took a different approach.

They came to us when they were relatively small, with just 6 members of staff. (In the last year, they have more than doubled their headcount, and are on track to double it again within 12 months.)

At that point they were still developing their customer base for their technology, a system for acute hospitals to manage their electronic medical records.

They knew, though, that their product was attracting enormous interest and funding, and that they needed to be ready to scale quickly.

And they understood that part of preparing for growth is to professionalise your financial management.

At the time, they had an internal bookkeeper and an external accountancy firm looking after their finances – but that wasn’t going to help them grow.

“We couldn’t ask for a better understanding of our finances, or for better business practices, or to look at how to build our accounting department, as long as we were reliant on one internal person plus some support,” says Michael. They also needed help refining their financial model, to ensure that when ‘serious’ revenue started flowing in, the company was as profitable as could be.

There was an added incentive to professionalise their financial management.

In their industry, mergers and acquisitions are often necessary to scale the business to meet demand. Having a transparent, well-managed financial structure and business model can speed up any due diligence process that takes place.

“We need to be ready at all times,” says Michael.

In the past year, we’ve taken responsibility for everything that IMMJ’s bookkeeper and accountants used to do, as well as taking over payroll from a different provider.

But we have also put in the sophisticated financial systems and processes for which you really need a finance department.

Michael and his co-directors now receive weekly, monthly, quarterly and annual financial reports – a level of reporting they could never have dreamed of previously.

And we work together, to make sure that the information they receive in these reports is useful to them, as they develop the business.

For example, we have looked at the relative profitability of different product lines, so they can focus on the areas of the business which are most lucrative.

Frequent cashflow reports and more rigorous procedures for managing expenses have helped them control costs. This is a key consideration when you are in growth mode!

Whilst we still have lots of work to do together, Michael and his co-directors now have the visibility and control they need over their finances to be able to scale quickly.

What about you? Is your company already growing fast?

Or are you busy putting in place the staff, marketing and capacity, so you can scale beyond £1 million or £2 million in 2019?

If so -- as Michael put it -- you mustn’t let your financial management strangle your growth.  

Quite the opposite. You need to swiftly professionalise your financial management, so it can handle a dramatic rise in turnover….

….And pave the way for it, too.

Get in touch today to discuss how we can help your company improve its financial management.

If you’re aiming to reach £5 million or even £10 million this year, it’s a crucial step.

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