What are financial processes and how to make them efficient
By Indeed Editorial Team
Updated 25 October 2022
Published 29 April 2022
The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.
Finance is key to businesses as they rely on making money and the financial services that circulate money throughout an organisation. When dealing with funds in an organisation, effective allocation and placement are both essential parts of the work. This is where financial processes are important and, by learning about them, you can help your employer improve the way they handle their finances. In this article, we discuss what financial processes are, why they play an important role in companies and how businesses can improve the efficiency of their processes reliably and consistently.
What are financial processes?
Financial processes are the functions and actions companies take when moving financial assets from one part of a business to another. They're usually undertaken by financial departments that handle a company's financial activity. Such activity includes:
accounting and bookkeeping
forecasting and strategy
Processes relating to finance work in accordance with regulations the government imposes, as financial policy and regulation is a key aspect of modern society, thus necessitating better governance and planning on behalf of the state.
Related: What does a financial modeller do?
Who completes financial procedures?
A wide range of different professionals in any given company is responsible for financial procedures at any one time. This is due to the multifaceted nature of many companies, encompassing a wide range of different departments and sections of a company. Below are some of the key roles dealing with financial procedures and what they do in a business:
The responsibility of a purchasing manager is to buy specific goods and resources for the continuity of business operations throughout the company. This is a key role because purchasing goods and services from external sources is the main source of outgoings for any company other than labour costs. Purchasing managers, although responsible for relatively basic financial procedures, deal with one of the highest volumes of finance in their processes.
Invoicing to and from external business partners is another key financial process and one that an accounting team is primarily responsible for. Accountants' employment is dependent on the quality and reliability of their financial procedures, as incorrectly processing invoices and receipts is a risk to business finances in the long term. If a company is large enough to hire financial specialists, they can make full use of an accountancy team and pass the accountability for financial procedures on to one specific part of the company.
Although some employees believe they're not a part of the company's financial procedures, this is very rarely the case. For example, someone working at the checkout of a shop handles financial transactions daily, which are fundamentally financial procedures the employee completes in line with all regulations. Whether a role in a company is explicitly involved in financial procedures or not, if you handle money or finances on behalf of a company, you're responsible for financial procedures.
On the other side of any given financial process is a customer. These are the individuals that a financial process pertains to and they're an integral part of the financial process. Customers transfer their money into a company in exchange for a good or service, and the transfer of funds from one party to another is a financial process in action. A customer is often the initiator of a financial transaction and, while they don't process the transaction itself, they play a key role in the necessitation of the process.
How to make financial procedures efficient?
Financial procedures differ in difficulty and complexity, ranging from very complex tasks to the most simple of movements of funds from one account to the next. If you focus on complex tasks, higher efficiency is essential. Efficiency, in this case, means that financial procedures take significantly less time and effort to complete, ensuring more procedures occur in the same amount of time. Below are some key ways of making financial procedures more efficient across a company:
1. Set out written processes
Although members of staff have the capacity to complete tasks independently, encouraging them to do so when following a range of written processes is essential. Writing down your processes means your employer uses the most effective ways of completing a task every time, rather than individual members of staff applying their own less efficient techniques in the completion of their work. This means all financial procedures are more efficient over time, saving the company money on labour costs.
Another benefit of implementing written guides for your financial procedures is the greater ease of training new members of staff. If a newcomer joins a business without specific processes in place, they learn from a range of different people and their way of doing things. This introduces a greater level of confusion and shifts the new employee's adaptation period. Writing down financial procedures and setting them out clearly speeds up the adaptation process for the newest hires.
2. Use a centralised account for expenses
Expenses such as travel and food, when members of staff are going to meetings and events in another location, are a significant cause of confusion for several accounting departments. Repaying staff members is a necessity and reading through the range of receipts and making the correct payment is an integral part of repaying an employee in the correct way. Using a central account with a company credit card is a far simpler way for many companies.
A concern some companies have in these circumstances is that an unreliable employee spends more than anticipated on a trip, exceeding a budget or spending on unnecessary items. But this issue is easily resolved by placing spending limits on the card or encouraging members of staff to return with the receipts from purchases over a certain level of spending. This eliminates the possibility of inappropriate spending or, at the very least, reduces the possibility of spending, causing long-term budgetary issues.
3. Thorough training courses
Ensure training courses in the company are as thorough as they can be. Financial procedures come in a wide range of forms, so engaging your members of staff in training in as much detail as possible is an important part of the training process. Prepare your members of staff for all eventualities with a comprehensive training plan covering all the worst-case scenario financial procedures. Ensuring a team is adequately prepared for emergencies is well worth the increased time spent on training.
Training such as this occurs in a range of different manners. If your staff has a significant level of expertise already, internal training is a good way to focus on transferring present knowledge from senior members of staff to new recruits. If the overall level of knowledge in the company you work for requires a shift, getting an external professional in for training your team is essential. This is because they have training in the field and know which method is best to explain difficult concepts to professionals.
4. Implement software solutions
Automation and software are increasingly central to the function of modern companies as they help improve efficiency by removing the requirement to complete simple tasks. There are a wide variety of benefits for companies that implement software solutions to improve automation in financial procedures, which are:
Elimination of human error: People occasionally make mistakes, which is entirely natural and a common occurrence in any workplace. Finance software significantly reduces the potential of human error, preventing problems from occurring and keeping your work at a high standard.
Saving time: Employee's time is valuable in any company, especially when the employee is highly trained and has difficult tasks to carry out. Automation software takes on these tasks, freeing employees up for more challenging work.
Saving money: A subscription to financial processing software is a relatively affordable move for a business. Compared to hiring an hourly employee for the completion of the very same tasks, business finance software is an affordable option and makes fewer mistakes when well configured.
Improve reliability: By using automated software solutions for your financial procedures, you're less likely to lose any important and sensitive financial data. This is because automated software typically backs up all its data automatically to the cloud, which you can easily retrieve if there's an IT issue.
Explore more articles
- 8 online public speaking classes and why they're important
- How to write an employee evaluation (with definition)
- How to create a project resource management plan (with tips)
- Corporate recruiting guide: benefits, how-to and tips
- What is trade protectionism? A definitive guide (with tips)
- How to value a company (with definition and jobs list)
- What are the benefits of a customer loyalty program?
- Project management vs. programme management: what's the difference?
- How to use voice recognition and how does it work?
- Security officer skills: definition, examples and tips
- What is mean, median and mode and how do you calculate them?
- How to make a graph in Word and why it's a useful tool