As part of our partnership with Scottish Pharmacy magazine and www.scottishpharmacist.co.uk, here is the latest article aimed at helping pharmacy owners build efficient and profitable businesses.
Finance Function
Business finance should not be seen as a means to an end for statutory requirements. It is critical to the success of any business and business decisions should consider the financial impact and feasibility on the business. Having an efficient finance team and timely accounting information is important for decision making.
Your finance team can achieve this by making use of the efficiencies of automation found within various accounting software, which can process large volumes of transactions quickly. Such efficiencies include:
Live bank feeds – meaning your banking information is automatically imported into your accounting software.
Banking rules – By defining pre-set transactional coding. Bank rules eliminate the need to manually post repetitive transactions.
Optical Character Recognition (OCR) Software – OCR software takes document files such as pdfs and extracts information by reading the document similarly to how a human would. Items extracted can be supplier name, invoice number, date and amount – all key information points for processing transactions.   Various accounting software such as QuickBooks Online and Xero have their own in-built OCR software. The OCR software drives efficiency as it pre-codes the transactions based on what has previously been processed, saving time on manually processing large volumes of invoicing. There is software such as Auto Entry and Dext Prepare which can retrieve the information directly from suppliers and, with predefined supplier rules, post automatically into your accounting software.
It is all well and good having an efficient finance function that processes the transactional information in a timely manner but ultimately it is only useful if it is processed accurately, correctly and consistently. Using the technology available assists with consistent and accurate coding.
With reliable and consistent input meaningful management information can be obtained and used to monitor income, overheads and profit levels and potential resultant tax liabilities.
In addition to this, an effective finance team will be able to produce reports such as cash flow forecasts, financial performance per pharmacy and budget versus actual results. Furthermore, by using cash flow forecasts scenario planning can be produced which can aid with operational and strategic decisions, for example the impact of acquiring another pharmacy, affordability of borrowings, or looking at the feasibility of employing more staff and assessing the impact it will have on both cash flow and profitability.
There are three ways in which you can approach the adoption of a finance function:
- Internal
- External
- Hybrid
By having an internal finance function, this will involve employing a team within the organisation. Â The team could involve various members such as book-keeper, payroll administrator and internal management accountant.
The benefits of outsourcing
One option for implementing a finance team is to outsource these services to your accountant. By engaging with your accountant there are two possible solutions. By fully outsourcing your finance function this would mean that your accountant will deal with all of the functions you would expect from a finance team from the day-to-day processing to preparing the management accounts. The other option is to retain some of the aspects of the finance function within your organisation and others are completed externally, for example book-keeping activities are completed internally and monthly reviews and management accounts are prepared externally.
Flexibility
By outsourcing you can choose which level of service you require, meaning you aren’t paying for services that you don’t need. For example, if you want to outsource the finance function entirely you can opt for services as: day to day processing, supplier payment runs, payroll, management accounts and more. Or if you are happy with your existing internal finance you can engage with your accountant to provide the management accounts, interpret the financial performance and provide an advisory level of service. Outsourcing provides you with a great degree of flexibility.
Whichever way you decide to implement your finance function is entirely your choice however, it can never be underestimated just how important an effective function is to an organisation.
If you would like to know more about the benefits of outsourcing, please email us at info@thomsoncooper.com to arrange a free consultation.
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Arran Anders – Outsourced Finance Manager
Arran is an online accounts specialist with experience in all accounting software platforms and associated apps. He guides business owners in choosing the best software solutions for their needs and offers tailored training to maximise their investment.