3 Keys to a Disciplined Business

The recession put a lot of companies out of business. Yet, others survived were unscathed. We believe that the survivors all shared a trait we call financial discipline. 

The companies that survived (or even thrived) have three common attributes: (1) The have a commitment to accurate accounting; (2) They have a financial plan and compare results to the plan; and (3) The use expert resources to guide sound management decisions. 

If these three things can get you through a five-year recession, imagine what they can do in good times. Ready to implement financial discipline techniques in your company? Here’s what you need to know:

1) Take accounting seriously

Every business owner wants to run a profitable business, but few dedicate enough time to measuring the actual results. The only way to do this is to have a dedicated accounting function. Just as sales can’t happen without paying attention to prospects, financial insight cannot happen without paying attention to the numbers. While it might seem easy to “get along” without accurate accounting during the good times, a lack of clear financial records leads to bad decisions in the bad times… and can put the entire business in jeopardy faster than any other factor. 

2) Use financial reports to drive planning & forecasting

Many companies have a CPA for taxes, and a bookkeeper to balance the checkbook. These are important functions, but even an accurate income statement (or tax form) is worthless if the financial information is not used to steer the company. 

Knowing what the results mean is so much more important than just knowing what the results are. A mature finance function is one that dives deeper into the numbers to measure key performance indicators (KPIs) and plan for the future. Successful companies move beyond simple reporting to develop business dashboards and forecasts. 

3) Find an experienced co-pilot

Every CEO should have a CFO or finance expert in his pocket- one who is skilled in forecasting, budgeting, setting prices, working with banks, and generally, grappling with the complexities or financial statements. (This is generally not the bookkeeper, CPA, or banker.) It takes a specific skill-set to put financial results into a business context and drive complex decisions. Getting the right person keeps the business focused on metrics that drive healthy growth- and avoid catastrophe.

Don’t Wait For a Recession

Even without a Great Recession, every business has external forces that will affect them: weather, competition, labor issues and other unexpected events. How you deal with the “unexpected” is fundamental to whether you thrive in the face of adversity. So many businesses simply do not have the financial discipline to work through a crisis and come out bigger and better. Do you?

Is your business financially mature? Are you struggling with long-term planning or just getting through the current unknowns? Take the time and effort to get your organization to the next level of growth by building a mature financial function. Creating this sound financial structure will support your business for years to come- in good times and bad.

We are here to help!!!

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