CEOs and business owners are under a tremendous amount of stress these days. Even if the business is profitable and has decent cash flow, leaders face uncertainties such as supply chain issues, inflation, difficulty finding staff, the potential of rising interest rates, the pressure of the board of directors to perform better and corporate taxes.
It is said that the bigger your business, the bigger your problems. But effective leaders can handle the challenges, if they are prepared. The key is to notice potential problems early enough to let you develop a plan and be ready to execute early to avoid or soften the impact. For many business owners and CEOs, forward-looking financial reports can really help.
Here are a few tools I use to help CEOs and business owners reduce the stress load caused by the financial side of their business:
- A weekly cash flow forecast process that lays out incoming and outgoing cash activity on a weekly basis
- A weekly scorecard to get early detection of upcoming issues
- Systems and processes that produce consistently accurate financial results
I’ve discussed the weekly cash flow process in the past and can’t emphasize enough the importance of this tool – it’s one of the best tools to see and predict cash sources and uses and spot any problems in advance. Many of us are used to running our companies using monthly financial statements. While they contain valuable information, the numbers tend to come out too late and are based on accrual accounting. Using the 13-week cash flow forecast, we can see more granular changes more quickly on a cash basis. This gives the company and the team a weekly view of results and time to mitigate any cash crunch.
The weekly scorecard tracks key performance stats and leading indicators that help spot areas of concern in advance. With data compiled and reviewed weekly, these leading indicators can signal if some things are heading off the rails. For example, a scorecard can provide early detection for margin erosion or an indictive problem with the warehouse causing customer service issues.
Having solid back-room processes that produce up-to-date, accurate, and reliable data consistently, reduces stress. If leaders are unsure if the numbers are accurate, it’s harder to make wise, data-based decisions. If they can’t rely on the financial system, they are operating a business while wearing blindfolds.
In my turnaround work, most companies I work with do not have solid financial statements and certainly aren’t producing them in a timely way. Leadership can’t rely on the data, and they waste time when they try to figure it out.
Even with tools and processes in place, issues and difficulties will arise. You should expect that. One of my associates does her bookkeeping for business AND personal life every Friday. She self-admits that number-crunching isn’t her core strength, but staying disciplined with this routine helps her spot challenges and make adjustments as needed before they become major issues. She’s learned to be less discouraged about finding an error and celebrate the fact that staying faithful to her system helps her course-correct before a major source of stress develops.
Things happen, but the better prepared we are, the better we can handle the situation. Use these CFO tools consistently. Just like getting a medical physical helps you ensure systems are functioning and indicates where to make corrections, CFO tools like these help you examine and encourage that your business is running optimally. And that means far less stress for you.