Maybe you’ve heard of maturity models (also known as capability maturity model or CMM) in the past. At a basic level, a maturity model is a way to assess a business’s current performance and map out what strategies require completion to reach a specific business goal. A financial maturity model specifically measures the level of maturity a business’s finances have reached.
By assessing a company’s current financial position, a business owner determines what level of financial maturity is necessary to reach business goals. A business owner also uses the current state of maturity to set a benchmark so that future progress can be compared to. After all, you need a starting point to understand how far you’ve come and if business growth strategies are in fact working.
How to Use a Financial Maturity Model to Reach Growth Goals
Work doesn’t stop once you determine what level of maturity your business has reached. A maturity model is a jumping off point to discuss with team members what strategies are needed to reach future targets. Use these steps to fully leverage your maturity model for growth:
- Detail your business goal or objective.
- Select a maturity model that aligns with this business goal.
- Use the outlined maturity model to assess where your company position is currently.
- Determine what steps are necessary to reach the next stage of your organization’s maturity (the best maturity models provide these steps to you). Likely, you need to optimize several business processes.
- Set up a team meeting cadence to discuss what progress has been made towards the goal and what optimizations are still needed.
How Anders Virtual CFO Team Uses Its Proprietary Financial Maturity Model
The Anders Virtual CFO Team has created a proprietary maturity model assessment to determine where clients and potential clients are in reaching business goals.
The assessment is based on five Profit Focused Accounting elements businesses should leverage for growth:
- Profitability
- Sales outlook (also known as sales pipeline or sales process)
- Financial reporting (specifically timeliness, correctness, compliance, risk management)
After filling out thirteen questions based on these accounting elements, your company is assigned a level of maturity for each area (listed here from most to least mature):
- Optimized: If your business is in this stage, your team isable to make real time decisions using well-rounded data (including future projections).
- Integrated: A company at this stagemakes strategic decisions based on business strategy and where you want to go. Data is not quite as advanced or real-time as an optimized business.
- Standardized: A standardized business makes proactive decisions based on data that is a little bit ahead of time.
- Foundational: If a business is in a foundational stage of maturity, leadersmake reactive decisions based on current rather than projected data.
- Ad hoc: At this stage of maturity, a business does not use data to make decisions. Gut instincts rule decision making.
Once the assessment is complete and we know the current state of our potential and current clients, we ask them what their ultimate business goal is. Not every business goal requires a business to reach an “optimized” maturity stage for each of the profit-focused accounting elements while others might. Knowing where our clients are heading helps us determine what level of maturity is necessary for each element.
Steps are then put in place to modify existing strategies to reach the next milestone. We also set up a periodic cadence to review KPIs meant to measure the status of growth towards these milestones. Sometimes business goals shift, and these reviews are used to assess necessary process changes to reach the new goalpost.
Some business owners are do-it-yourselfers. You don’t always need or want a financial advisor to create a solid maturity model. Use our maturity assessment with actionable steps to reach the next level. It only takes ten minutes of your time and has a total of thirteen questions. Then, set recurring meetings with your company leaders to analyze where you are on your journey and if process improvement is necessary to hit targets.
However, if you’d rather have one of our CFOs walk you through the steps and help with business financials, reach out to one of our virtual CFOs for a free consultation.
