7 challenges faced by finance manager and how to solve them?

Apr 05, 2024

There is a diverse, wide range of problems that unexpectedly arise while running a business and these challenges can create significant financial issues.

From negative cash flow to unequal books total or inaccurate accounting reconciliation, everything can cause serious impacts on the bottom line of the business.

However, the majority of such problems can be easily prevented by the use of the right expense management and reporting tools. 

The hack to sidestep a financial ruin lies in the trick of asking the right questions and also knowing the steps to control any mishaps.

If you or your financial team do not possess this knowledge, your business would end up tangled in an endless circle of problems and debt.

Your business can be severely harmed if you do not have the right tools, knowledge, and action plan to address the causes of the issues.

7 challenges faced by finance manager

1. Managing cash flow

Every business can suddenly fall due to a lack of adequate cash flow, which in turn happens due to poor cash flow management. This is one of the biggest challenges faced by finance managers.

The inflow and outflow of the company money need to be precisely tracked to get the right insight. Most of the traditionally recorded financial statements are intently not meant to give you information regarding the cash flow and its improvement.

They are simply statements made for record-keeping, not business management. Automated billing and collection processes and report management can significantly help in improving the cash flow of your business.

Without these, cashflow inadequacies will catch up to your business — maybe not now but definitely later, and it's not a pretty picture. The phrase to remember here is “you can’t manage what you can’t measure.”

Through the use of the right expense management platform, you can seamlessly customize your cash flow demands and make an immense profit.

2. Not having a plan for using the budget

You cannot run your business by just sitting in your office and thinking that the business bank account has enough to cover all your expenses and pay the bills.

It won’t be long before your business ends up in a debt cycle and ultimately all the finances go out of your hand. The best business advice to avoid ruining the business finances is to run your company on a budget.

Create a calculated budget and make sure to stick to it. Developing a budget will not only help you wisely manage your business money but will also prove to be immensely helpful in future financial forecasting and analyzing the directions where the business can grow.

Along with this, keep updating the budget regularly according to the changing situations and major business decisions.

3. Not raising enough capital

Not being able to get their expected amount of funding is one of the other challenges faced by finance manager in an organization. However, it is extremely important to have a solid business proposal and growth plan to attract investors to invest in your business.

Without the funding money, your business development would be near impossible. There are five main ways through which you can raise funding:

Venture funding

SBA- bank loans

Private Equity

Loans from friends and family

Bank loans

The lack of working capital is an extremely alarming issue for companies of all sizes. Particularly, it could lead to more financial management problems for small businesses because of their fewer resources.

The lack of capital can restrict businesses from expanding to more markets, hiring new talents, exploring new directions, and grabbing fruitful opportunities.

Although, you can improve your chances of getting capital by improving your credit score, having a well-drafted business plan, and keeping your P&L statements and accounting books updated and available to audit.

4. Too much debt

There are various reasons why entrepreneurs take loans and sometimes they do max out their options. If the debt is not properly handled and repaid, the business can sink.

Whichever way you are trapped, debt can cause short and long-term effects. For example, the business may take time to build profits and even meet the bare minimum. Till that time, the employees and vendors would be on hold and overhead costs would add up.

To reduce your debt and pay it back in time, determine the areas where you can effectively reduce costs. Look for creative financing options like crowdfunding and angel investors and group your business loans together to make it into one payment.

5. Not having a proper reporting

Small businesses are recommended to record all their transactions and it would be even better if is done under the guidance of a financial accounting expert. Records include earnings, expenses, and sales.

Private companies are not mandated to disclose their accounting reports publicly. But not keeping a proper report and not keeping track of the financial data leads to major problems.

This includes improper tax filing with the wrong revenue estimation, extra interest charges, and many more.

On the other hand, public companies are required to disclose their financial reports and inaccurate filing would lead to financial management problems which would take immense firefighting strategies because the records were public.

This would also lead to leaving a mark on the reputation of the company. To solve this problem and make reporting easier, a comprehensive expense management system should be adopted by all companies.

The automation of expense entries and real-time visibility into financial data would make reporting a piece of cake.

6. Poor tax compliance

Managing corporate finance problems is a heavy task, and complicating it with overpaying taxes is not at all a good idea. Almost 85% of small businesses end up overpaying their federal income taxes every year

Others are underpaying and moving on the wrong side of the authorities. Both these situations are harmful to any company because it takes intensive effort, time, and money.

The most significant issue that all businesses face when it comes to federal taxes is not the payment aspect — it is compliance. This is a heavy burden, especially for small businesses.

7. Not paying bills on time

Everyone who is a part of your business in any way has to be paid. For all the goods and services you use for your business, bills have to be paid on time. Sometimes, a late payment can be overlooked.

But if your business becomes one of those which keep repeating the late payment process, you will end up paying loads of money as fines.

This can cause damage to your supplier relationship, which ultimately means that the business will be facing a hard time finding the basic raw material.

Most companies are still doing their accounts payable process manually which is extremely time-consuming and labor-intensive. It makes the business prone to more errors and maybe even fraud.

An automated expense management system can be immensely helpful to diminish any data-entry errors and will also save the company numerous hours.

For example, during the whole process of manually entering vendor invoices and repetitive expenses, the automated expense management software would automatically submit invoices and manage the approval workflow.

How can Volopay help businesses to manage expenses efficiently with expense management?

All the above-mentioned problems can be easily solved by getting one business account with Volopay.

It is an all-in-one corporate expense management platform built to help business automate all their financial process from basic vendor payments to subscription management to bill payments and reimbursements.

With features like an integrated accounting system, real-time visibility into transactions, automatic invoice processing, approval workflow management, and multi-currency wallets, you can keep your business finances on autopilot and focus on the more important aspects of the company.

Create and control all your company expenses with just a few clicks