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What is Financial Operations (FinOps)?

Financial Operations, also known as FinOps, is a holistic approach to accounting, finance, operations, and technology. It moves beyond basic bookkeeping by using accounting and finance as the basis for all other operations. Done properly, Financial Operations provides the infrastructure upon which the rest of the company is built. 

Financial Operations can be understood as four key components: accounting operations, financial management, operational cadence, and technology. Let's take a closer look at each. 

Accounting Operations

Accounting Operations are the processes and policies by which transactions are entered into the accounting system. It includes transaction entry, accounts payable management, accounts receivable management, expense management, and the close process.

Transaction entry deals with how transaction are entered into the accounting system. Bank and credit card transactions, vendor bills, and client invoices, journal entries, custom accruals, capital transactions, and other non-cash transactions are included in this work.

Accounts payable management defines how vendor bills are entered, approved, and paid. Proper accounts payable management ensures that bills are entered in a timely fashion, allowing adequate time for them to be reviewed and approved before sending payment. Creating a bill approval workflow is essential to any cost control efforts and it is common to use multiple levels of approval to prevent employee fraud or abuse. The bill payment process should easily control when and how bills are paid.

Expense management defines how expenses, primarily from credit card transactions and employee reimbursements, are entered, approved, and paid. Proper expense management ensures that expenses are entered quickly, allowing management to review and approve transactions before sending payment. Creating an expense approval workflow is also essential to cost control efforts. Again, it is common to use multiple levels of approval to prevent employee fraud or abuse. 

Accounts receivable management defines how the company transacts with its clients and customers. For service companies, it defines how client invoices are created, sent, and paid. It also defines the collections process for delinquent invoices and late payment policies.

Revenue recognition defines how revenue is entered and recognized on the income statement. It properly accounts for revenue as it is earned rather than when it is invoiced and is essential for creating complete financial statements.

The closing process defines the process by which the accounting records are considered complete and final each period. Typically done every month, this process helps ensure the financial statements are accurate and ready to be relied upon by management. It includes transaction reviews, account reconciliations, and other custom processes. 

Financial Management

Financial Management encompasses cash management, reporting and analytics, business planning, pricing, and capital transactions.  

Cash management defines a company's liquidity policies (how much cash it will keep on hand), its sources of working capital (debt, equity, retained earnings), payment terms for its customers, and other policies and processes that effect working capital.

Reporting and analytics provide the business intelligence used to manage the company. It goes beyond the standard financial statements (income statement, balance sheet, and cash flow statement) to include an annual operating budget, variance reports, key performance indicators (KPIs), production analytics, profitability analysis, and rolling financial projections. These reports provide management with the necessary data and business intelligence to lead their company effectively.

Business planning is a critical for effective management. It includes workforce planning to ensure headcount aligns with the expected workload, business development planning to forecast revenue and create sales goals, and planning strategic initiatives to grow and/or improve operations. This effort is aided by reporting and analytics to create financial models for proposed plans and assist with decision making.

Pricing is arguably the most important issue concerning the financial health of small businesses. However, the topic is often neglected, misunderstood, or outright avoided. It is critical that management create pricing policies and processes that are supported by actual financial data and applied consistently with customers. 

Capital transactions, and the terms on which these transactions happen, directly effective a company's financial health. It is important that these transactions are entered into with forethought and a clear understanding of their impact on working capital.

Operational Cadence

Operational Cadence defines the schedule of meetings that facilitate administration and management. It is used to develop healthy organizational habits by creating regular time and space to focus on the financial operation. 

Operational Cadence is broken into two types of meetings, Accounting Ops Meetings and Financial Management Meetings.

Accounting Ops Meetings occur on a weekly, twice monthly, or monthly schedule. It should occur at least as frequently as the company's payroll schedule. For example, if payroll occurs once a month, Accounting Ops Meetings should occur at least once a month. That said, a weekly rhythm tends to be most effective.

Anyone who has financial responsibility or the ability to transact on behalf of the company should be in attendance. This includes credit card holders, those that place vendor orders, project managers, owners, and other relevant staff.

This meeting should be brief, typically lasting no more than an hour. The agenda is simply to ensure that accounting administration has been completed. This includes ensuring that expense reports, bills, and timesheets have been entered and approved. Bill payments should authorized and scheduled.  Work in progress should be updated with revenue recognized accordingly. Finally, unpaid client invoices should be reviewed and appropriate follow-up scheduled.

Given the close knit-nature of accounting and operations, these meetings tend to be followed by an operations or project management meeting.

Financial Management Meetings typically occur on a monthly basis and have three rotating agendas: revenue and expense analysis, after action reviews and profitability analysis, and strategic planning. These meetings typically last up to 2 hours.

Revenue and expense analysis focuses on financial performance at the corporate level. Expenses are benchmarked against the operating budget and industry averages. Revenue, production analytics, and operating margins are also analyzed and benchmarked against the operating budget and industry averages. 

After action reviews and profitability analysis focuses on understanding profitability at the project level. The purpose to discuss what went well, what could have gone better, and review the financial performance of the project. This meeting is to create a feedback loop that continually improves pricing, project management, and/or production.

Strategic planning focuses on creating a comprehensive business plan and understanding its impact to cash flow.  The business plan is captured in a financial model to forecast cash flow and ensure sufficient working capital is available to execute the plan. 


Technology should allow your financial operations to be digital, efficient, and scalable while providing management with control and visibility. 

While many technology options exist, most small businesses will benefit from using QuickBooks Online, BILL, and Expensify as their core technology stack. When exploring technology options it is important to understand how/if each software syncs with the rest of your technology. In order to create a comprehensive technology stack, each software must integrate seamless with the rest. Additionally, each software must be intuitive and easy to use. The easier and more intuitive software is, the more likely it will be adopted by those who are intended to use it.