Every time I start a new relationship with a client, I try to put basic financial controls, processes, and reporting in place.
I’m amazed that many of the companies I work with don’t have these basics down.
As I work with turnaround companies, I notice a basic commonality with their financial systems that indicate why they are in bad shape. Simply put, their financial statements and results reporting are not completed in a timely and accurate way.
One company I’ve worked with used to employ over 500 people. Their workforce is now cut in half. They experienced terrible results, evident in large part by their inability to pay vendors. Halfway into a calendar year, they had no financial statements yet. The prior financials had questionable credibility.
How can anyone run a business without timely and accurate financial statements? How do they know how they are doing? It’s like playing a game with no score card. Can you imagine a soccer game where no record is kept of any goals made? The players just run around kicking and heading the ball for 90 minutes, the horn blows, and no one knows who won or lost.
Without good numbers, you have no idea your direction.
250 families are dependent on the survival of this company. 250 more were affected by its troubles. It’s not fair to either set of families to run a business in such a haphazard way.
This is a leadership issue. The former CEO never believed the numbers they did have. He doubted the costing system; he questioned the financial results; he manufactured “facts” (that simply weren’t true.) He pushed his team to do stupid things, thinking his way was the right way. It sounds crazy, but I’ve seen it time and time again.
Underperforming companies sometimes don’t like to look at bad numbers. But in reality, that makes no business sense. You need to be brutally honest with where you are, in order to make informed decisions for the future. Ignoring the bad numbers won’t make them go away anymore than avoiding the dentist will help your toothache.
We finance pros must do a better job. We need to be adamant about getting accurate, credible and timely reports to the leaders that need it. If they doubt our accuracy, the info will be useless. They will start making decisions only on ‘feel.’ While intuition is something to be considered, it works best when informed by reliable data. Steering a ship by feel alone is dangerous.
As we get to the half-way point of the year, it’s time to evaluate your financial systems and processes. Are you providing/receiving timely, accurate monthly financial statements and daily/weekly key indicators. If not, address the problem NOW before you negatively affect even one family relying on your company to stay strong.