What is a financial maturity model?
A financial maturity model is a framework used to assess how effectively a business manages its financial processes, decision-making and performance over time.
It helps organizations understand their current state, identify gaps and define the steps needed to reach more advanced levels of financial performance.
More broadly, maturity models are used across industries to measure how developed a business capability is—from ad hoc processes to optimized, data-driven decision-making.
What Is a Financial Maturity Model Used For?
A financial maturity model helps businesses:
- assess current financial processes
- identify gaps in reporting, forecasting and decision-making
- prioritize improvements aligned with business goals
- track progress over time
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 The Anders Virtual CFO Team Uses Its Proprietary Financial Maturity Model
Many firms use maturity models to guide financial improvement. At Anders, we apply this approach through a structured assessment built around five profit-focused accounting elements.
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)
Most financial maturity models follow a progression from reactive decision-making to fully optimized, data-driven operations.
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 is able to make real time decisions using well-rounded data (including future projections).
- Integrated: A company at this stage makes strategic decisions aligned with long-term business goals. 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, leaders make 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.