This article was originally published in the Union Leader.
By Kenneth Peterson, CEO & Founder of Next Level Now.
In the world of business, financial management evolves over time, just like human needs progress in stages. Think of Maslow’s Hierarchy of Needs, which starts with basic survival needs like food and water and ascends toward higher, more complex needs such as love, purpose, and self-actualization. We believe that businesses, too, follow a similar progression when it comes to their financial journey—from essential tasks like invoicing and payroll to advanced strategic financial leadership that drives growth.
This article explores how businesses of all types evolve through different stages of financial maturity, moving from the foundation of accounting basics to the peak of strategic decision-making.
The Foundation: Billing and Basic Accounting
Just as Maslow’s pyramid begins with the most basic needs, every business starts with the essentials of financial management. At the base of the financial hierarchy, businesses focus on fundamental tasks like invoicing, billing, and basic accounting. These tasks are essential for cash flow and the daily operations of any business, and they include:
- Basic bookkeeping: Ensuring transactions are recorded, bills are paid, and invoices are sent.
- Manual tracking: Using spreadsheets or basic accounting software for financial management.
- Online banking: Ensuring payments are processed efficiently, but with limited analysis beyond balance checks.
At this stage, the focus is on staying afloat, ensuring that the business operates smoothly without necessarily looking beyond day-to-day financial tasks. While important, relying only on basic financial tools without a broader strategy can limit potential growth and lead to missed opportunities.
Moving Up: Introducing Financial Projections and Budgeting
Once the basics are in place, the next step in financial evolution is planning for the future. This corresponds to Maslow’s “Safety” stage—ensuring stability and managing risk. At this point, businesses should move beyond basic operations to a more strategic approach. Financial tools like budgeting and forecasting help businesses anticipate challenges and make informed decisions.
Rolling financial predictions are particularly helpful in this phase. Unlike static, yearly budgets, rolling projections are continually updated based on real-time data, allowing businesses to anticipate revenue changes, manage costs, and plan for future growth. By implementing tools that track cash flow more closely and provide insights into the financial impact of key decisions, businesses gain the stability they need to grow steadily and confidently.
The Pinnacle: Strategic Financial Leadership
At the top of the financial hierarchy lies strategic financial management, which corresponds to Maslow’s “Self-Actualization”—the highest potential of financial health for any business. At this level, financial management goes beyond reactive bookkeeping and becomes an integral part of driving growth.
With advanced tools like cash flow analysis, businesses can understand exactly how money is moving in and out of their organization. This allows for more effective decision-making, whether that involves optimizing revenue streams, cutting unnecessary costs, or adjusting pricing strategies. At this stage, businesses can leverage insights such as profit margins, customer lifetime value, and key performance indicators (KPIs) to make smarter, data-driven choices that promote long-term profitability.
Strategic financial leadership also empowers businesses to implement smarter pricing models, expand services, and scale effectively. With a deep understanding of their financial dynamics, businesses can unlock higher profit margins and sustain growth over time.
The finance maturity pyramid also applies to personal finances. Just paying your monthly bills without forward thinking about retirement won’t land you on the beach at 65.
Ken is a recovering CPA and Manchester native. He runs a fractional CFO firm based out of Portsmouth.
At Next Level Now, we specialize in offering fractional CFO and financial services customized to meet the unique needs of small businesses around New England and beyond. Demystifying finance is a passion of ours, and when businesses of any size graduate from focusing on just doing the books to getting strategic with finance, that’s when real growth happens.