When it comes to considering the finances of your business, a little preparation can go a very long way. Stewart Lambert, Co-Founder of Firebird, explains how too many companies are failing to unlock key opportunities at the bottom line.
"A majority of small and medium-sized businesses are really missing a trick"
I’m now in my third decade of working in finance – advising on sales, raising funds, buyouts, investments and more at a corporate level, predominantly in the travel and leisure industry. After all that time I can safely say a majority of small and medium-sized businesses are really missing a trick. Doing so is costing them time, lost opportunities, and – ultimately – money.
I’m talking about the value of decent financial management, and the fact that too many business owners don’t see it, viewing the accounts function as one that just “keeps score” and is a cost to the business. These companies check the data every few months, but don’t have much care about what their management accounts are showing them. In reality they are focusing on a significantly narrower range of performance measures.
These businesses could be doing so much more, with minimal extra effort.
"Opportunity always knocks at the least opportune moment. As do unexpected challenges"
There are some key reasons why having good financial data is good practice for a company – with management accounts, which include a Profit and Loss account and balance sheet, preferably reviewed every month; or, at the very least, quarterly.
It means all the relevant figures are on hand if you’re seeking to raise funds, or sell your business. While recreating historic data is not impossible if you need to, the process is a difficult and costly one. Far better to get into regular accounting habits from the beginning. As Ducharme’s Precept puts it: “Opportunity always knocks at the least opportune moment.” As do unexpected challenges.
Another, more innovative, reason to collect good data is the value that financial data has when it comes to forming effective business strategies. Good financial data equals good information for management. It tells a board in detail about their company: the ins and outs of turnover and profit; the successes; the areas needing improvement. It can be their impartial, objective guide to help make sound decisions throughout the year.
"Clear and accurate financial data can act as an essential early-warning system"
Strong data also enables companies to look forward. Clear and accurate financial data will give you the basis for a dependable forecast, and can act as an essential early warning system. In essence, this tells you what “good” looks like for your business, giving you something to measure your performance against, for spotting issues early.
If you have someone on standby who can interpret your financial accounts, you have a quick way to unlock how your business is functioning, and can do this with precision. That process need not be costly, or involve the recruitment of a Financial Controller or Finance Director. It is something you can easily outsource or maybe use as a part-time resource – in ways that will save you far more money than it will cost in the short-term.
At Firebird, we advise on small changes to generate a big impact in the travel, leisure and education sectors, helping a range of businesses run better at every level. Learn more about what we do, and get in touch, at www.firebirdpartnership.com
Stewart Lambert is co-founder of the Firebird Partnership, with nearly 25 years’ experience in corporate finance, advising owner managers on selling their businesses, raising finance and making acquisitions.
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