In dealing with business owners and entrepreneurs, we are often asking questions about the financial health of a business. This is also true when we deal with departments in a larger corporation. Knowing the financial state and status of your business or department is truly critical.
It is scary to see how infrequently some business people are monitoring their financial metrics and also understandable. Most people that start out in business get annual statements from the accountant or perhaps quarterly. Managers get a quarterly summary or see published quarterly numbers. People get conditioned to waiting long periods before knowing how they are performing.
It is critical that finances and cash are monitored weekly and even daily and this doesn't mean waiting for the accountant. Financials serve their purpose and update you on the health and condition of a business. Unfortunately, changes in a balance sheet are often slow to demonstrate trends and a business owner need to know where things are constantly. Cash is King in business. Knowing your cash situation is the timely and critical means for managing business tightly.
We work with clients to ensure they are running at least a weekly financial/cash performance summary. This includes, sales, accounts receivable (current and also immediately expected), accounts payable (current and also must pays), then current cash positions. We can see cash shortfalls and manage our clients and suppliers. We have seen people grow a $15 million dollar company on cash management without being able to read a financial statement ... this isn't ideal but does show the value of cash metrics before statement reviews.
Establish your weekly Key Performance Indicators (KPI's) for team performance and responsibilities AND then set the weekly cash flow KPI's next. It is the key to growing a performing, profitable, company and team.
1 comment:
Very Nice and Informative article. Thanks for sharing.
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