Understanding Finance in business there is common approach for an owner to delegate or outsource all financial management to others.
The bottom line is just how much money is there in the bank or stock to sell. As we approach weaking market investment and stagnating grow we need to accept that Understanding Finance is important.
More than Cashflow
During the early 1990s it was very common to attend business start up workshops that focused on projections built around cashflow. This is a flawed concept because cash can be committed years before it is used, an excellent lever but not a good idea to spend.
How many businesses go into liquidation missing simple things, taxation payments mount, pension costs, new models of core products. One of my employers was caught with £30k old stock in mobiles when we bought each unit in at £1k+. We ended up letting them go for £600 per unit and took the hit.
The reason £600 was acceptable linked wholly to cashflow. He failed to look at product redundancy, refused to supply other retailers, all measures that could have been mitigated by good risk management.
Building Financial skills
Economic performance is more than simply judging the cash value of your business and turnover, social impact and investment are critical to sustainable development.
Know how many times your income supports the local economy.
Learn about the break points in a financial report, know when your accountant or bookkeeper is not firing on all cylinders. Understanding the modelling and planning is one part.
Financial Discipline
If you have all the controls but fail to exercise them you are like so many businesses in for a rough ride. Those affected by seasonal drops or expecting high income for just a couple of months a year are better off looking at a whole asset management approach.
If finance is a foreign language to you or the directors of a company ensure you access some basic training.
I’m not sharing what we do or how we complete a whole company audit and set up your business for future sustainable development. Call us for that information (+44) 07766738799 – leave a message. or use the contact form
Keep your business growing
That’s a really insightful point about prioritizing understanding finance, especially with current market conditions. It’s smart to recognize the importance of knowing where things stand!