Your Business May Need a Financial Tune-Up: Know the Signs
As we move into a new year, it’s a perfect time to check for signs that your business may need a financial tune-up.
Sometimes those signs are subtle, and on the surface things look good. Even if you’ve been in business for years, your reputation with customers is excellent, and you are experiencing growth, issues can be smoldering under the surface and impacting your organization.
The good news is that there are symptoms of impending trouble you can identify so that you can take action now. Are any of these evident in your own business?
- Bookkeeping is behind or of poor quality.
- Timely and accurate monthly financial statements cannot be produced with the data available.
- Owners are unable to determine whether they are making a profit.
- Cash flow is usually a challenge.
- Employee job responsibilities are not clearly defined.
- General ledger inventory levels do not agree with the sub-ledger.
- Inventory is regularly out of stock.
- Accounts Receivable show amounts due over 90 days.
These symptoms are red flags that there is a need for more Financial Intelligence – an understanding of the most important financial statements, the ability to interpret them, and the know-how to apply those interpretations to inform business operations and decision-making. This requires a deep dive into the practices and procedures of the company, financial and otherwise, to uncover underlying issues.
An assessment of financial and operational documents, along with interviews of owners and employees, will reveal information to prepare a Gap Analysis which compares fundamental financial business practices with those of the company. The analysis will identify elements of the financial and accounting infrastructure that may be missing. An unstable infrastructure typically occurs in businesses which have been without the regular guidance of a CFO, relying instead on their bookkeeper and/or tax CPA to keep their finances in order, when neither may have the perspective, experience, or skills to do so.
To restore a solid financial foundation and framework, fundamental best practices need to be established in all areas. Rebuilding will require that owners and key employees work together to implement newly recommended processes and procedures that resulted from the assessment. You may expect any or all the following actions:
- Get your books caught up, which might require hiring a new or supplemental bookkeeper to expedite the process.
- Develop and document processes for all accounting functions or update existing procedures.
- Train or retrain employees involved with bookkeeping and accounting to implement new processes and procedures.
- Rework the chart of accounts to ensure the generation of meaningful financials.
- Establish a process for timely recording of all transactions and a monthly schedule for presentation of financials, including analyses and reports.
- Schedule budget and cash flow projections for quarterly review and revision.
- Perform a physical inventory and ensure that the sub-ledger matches inventory.
- Establish re-order points for critical inventory items.
- Create an annual Profit Plan which includes a metric to assess actual results.
With an infusion of Financial Intelligence, your company will be a new and better version of itself – one that operates efficiently, effectively, and confidently, based on accurate data that is regularly and readily available. With best practices and fundamental tools in place, the company will be positioned to dramatically change its performance and productivity, including enhanced revenue growth, increased net operating income, and boosted company valuation.
I find that business owners may often feel they are challenged to keep their finger on the financial pulse of their company – which is understandable considering everything that requires your attention. As a former CEO of my own $20 million company, I can relate and provide insight into the issues business owners face overall, beyond the financial challenges. Through the implementation of Financial Intelligence that may have been missing, I work in partnership with companies to strategically guide their business onto a new and well-defined path to profitability and growth.
If any of the tell-tale symptoms exist within your company, they signal interference with your ability to optimize operations, performance, productivity, profitability, and growth. Act now to address it head on. Contact me to schedule a complimentary consultation to discuss regaining control of your company’s financials and its future.
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