How Financially Disciplined is Your Company? 3 Rules for Surviving any Storm

The recession is over, leaving behind a wake of net losses, bad cash flow and bankruptcies among those hardest hit. At the same time, other companies have emerged unscathed.  What factors separate those that made it through the recession from others that did not?

I’ve worked with dozens of companies over the last 5 years and believe that the survivors all have one thing in common: a mature and disciplined finance function that protected them from the worst of the storm by providing key data, information and insight to guide management decisions.

Business is always subject to external forces — from competition, weather (e.g. hurricanes), regulation, labor strikes, etc.   Having the financial tools to deal with these inevitable crises is fundamental to survival… and yet so many companies are completely missing these vital skills.

So what is “financial discipline” and what makes a company financially mature? There are 3 indicators of financial maturity that you must have to weather the next storm — economic or otherwise:

  • A Dedicated Accounting Function…

Every business owner recognizes that success is measured in dollars, yet not every business bothers to keep track of this singularly important resource.  This is like saying the company needs sales but has no sales people. This mistake is not size or age dependent.  I have seen long-standing and multi-million dollar companies that hobble along without an accounting department… until they run headlong into a financial crisis that bankrupts the company.

  • That Supports Business Decisions…

Many companies tell me that they have a CPA who does their taxes, or a bookkeeper that balances the bank statement.  While necessary, neither taxes nor bookkeeping will keep your business running in times of trouble.

A mature finance function is one that helps management understand the financial results. Knowing what the results mean is so much more important than just knowing what the results are. A “mature accounting function” has answers to questions such as: How (and how fast) can we grow? Is product pricing correct? Is the company profitable? Is working capital sufficient to survive the next challenge?

  • With Experience and Skilled Advisors

The right person makes all the difference in every job, but so many CEOs have trouble judging the skills of a finance person. A tax CPA is not generally skilled to help the company forecast, budget, set pricing, or even help management better understand the financial results.  It takes a specific skill set to put financial results into a business context and drive rational decisions.  Finding the right person with the right set of skills is key.

How mature is your finance function? If your business is stalled or faltering, and if you are ready to take the business to the next level of growth, now is the time to commit to building a mature financial function.

FUSE provides business owners with the knowledge needed to make better business decisions. Our virtual finance and accounting staff can cover the gaps in your organization to help your financial function mature.

Dedicated to your success, Dan Gotte

Dan Gotte is a partner at FUSE.  He has experience as an accountant, a business owner and an investor. Give him a call to make your own finance function more disciplined and mature… 980.329.8014 or [email protected].

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