The early stages of the year are an ideal time to take a closer look at your financial operations. With Q4 wrapped up and a fresh fiscal year ahead, your team has the opportunity to refine processes, address inefficiencies, and establish a strong financial foundation to support your company’s growth in 2025.
Companies that choose to skip this evaluation risk falling behind—especially as M&A activity continues to climb. M&A deal activity on Carta increased by 10% in Q4 2023 compared to the prior quarter, rose again by 5% in Q1 2024, and revealed another rise of 4% in Q2.
The upward trend in transaction activity means growth-stage companies need to renew their focus on financial readiness—and prioritize effective financial operations to achieve it. Whether your company is preparing for a potential acquisition, funding round, or simply optimizing for scalability, a thorough financial operations review can put you in a position to seize opportunities whenever they arise.
Starting Questions
Before you dive into different areas of your financial operations, it’s a good idea to start with a few critical questions:
- Are our accounting processes working efficiently, or are there recurring bottlenecks?
- Should we consider external support for bookkeeping or financial operations to improve accuracy and scalability?
- Do we have audit-ready financials in the event of an unexpected M&A or funding opportunity?
- How well are our financial operations aligned with our growth goals?
By taking the time to answer these questions, your team will gain a clearer picture of where your financial operations stand and where you might need to make improvements. With that baseline in place, let’s explore the key areas to review as you conduct your financial operations evaluation.
Key Areas to Review
Bookkeeping and Accounting Accuracy
Accurate bookkeeping is a fundamental pillar of financial stability. Having a year-round approach to audit preparation can help your team keep surprises at bay. This could look like closing books monthly, maintaining a closing checklist, and regularly reconciling balance sheets.
If your team struggles to maintain organized financial documentation or reconcile discrepancies, you should consider investing in standardized processes or financial software.
Scalability of Internal Financial Processes
Ideally, your financial operations will be able to scale with your company. As growth picks up, processes like cash flow forecasting, accounts payable and receivable management, and expense tracking should adapt to meet changing demand. Integrating financial modeling tools and planning for a range of possible scenarios can help anticipate cash flow needs and identify warning signs early—before issues escalate.
Gaps in Financial Strategy or Execution
Any strong financial strategy will be clearly aligned with a company’s goals. Need to support more alignment between the two? Regularly reviewing finances, tracking key performance indicators (KPIs), and staying ahead of new accounting rules will ensure that your operations contribute to your company’s growth.
Failing to assess and manage shortcomings could leave your company vulnerable to challenges down the line when faced with investor scrutiny, compliance audits, or unexpected economic downturns, so it’s important to prioritize evaluations.
Fractional Support for Financial Operations
Turning to external support for financial tasks can bring greater expertise, scalability, and cost efficiency to your team, especially if you’re growing quickly.
💡Consider this example: A growing company didn’t expect to get acquired in Q4, but suddenly found itself in talks with an interested buyer. Because the team hadn’t anticipated any transactions, they didn’t have properly prepared or optimized financials. At the last minute, they had to scramble to clean up their books, which added additional stress and could not present the best possible numbers for a strong valuation.
This scenario is surprisingly common. Many companies delay bringing in fractional services until it’s too late, and it puts them at a disadvantage in high-stakes situations.
When External Support Makes Sense
- If internal teams struggle to maintain complete, timely financial reporting
- If bookkeeping or compliance tasks are taking focus away from strategic financial planning
- If scalability is an issue, outsourcing can help manage growth without the overhead of an in-house team
Benefits of Financial Operations Guidance
- Cost Efficiency: Minimize costs compared to hiring full-time finance staff
- Expertise: Gain access to professionals with specialized knowledge around accounting best practices and compliance
- Scalability: Easily adjust support levels as your company grows
What’s Next? Preparing for Deals and Transactions
Many companies wait until they need funding to clean up their financial operations. That can be a costly mistake. Instead, manage your financial operations proactively to make sure your books are always ready for lenders, investors, acquirers, or other partners.
Financial Operations and Growth Goals
When managed effectively, financial operations contribute to growth. If you plan to raise capital in 2025, your financial reporting will need to clearly reflect profitability, cash flow management, and strategic investments. Investors look for well-documented financials, clear projections, and a plan for how capital will be redirected.
Preparing Clean, Audit-Ready Books
A year-round audit strategy helps your team avoid making updates at the last possible moment. Best practices include:
- Running regular internal audits to identify and address discrepancies early
- Maintaining clear documentation of revenue recognition, expenses, and asset valuation
- Staying on top of tax planning and compliance requirements to avoid liabilities
M&A activity is increasing, which means lenders and investors will be particularly focused on the finer details of your company’s financials. For companies that maintain audit-ready books, growth opportunities will be much easier to take advantage of as they come up.
Final Thoughts
Q1 is a great time to evaluate your financial operations, identify gaps, and implement improvements that will set your company up for success in 2025. Interested in planning your next steps? Whether you’re improving your financial operations, seeking expert guidance, or revisiting your financial strategy, making financial operations a priority now and responding proactively will position your company for long-term stability and success.
5th Line is ready to be the partner that can make it happen. If you want to learn more about our expanding services and expert financial support, get in touch with our team today.