Building Your Business,Business Finance,Business Accounting,Accounting,Business Assessment,Cash Flow,Financial Management
Don't you just love the changable nature of business? One minute we're doing ok, the next minute ... well, there's always something around the corner!
How is your business coping? In particular, how are your finances? Are you feeling the pinch or riding high on a financial wave? It might be time to stop and focus for a minute on how your business is going and make sure that you're doing all you can to maximise your financial position.
Changing external conditions
The need to effectively and appropriately manage your finances is imperative now as never before. With so much volitility all around, external factors can have a big impact on your business. Let's see what happened to one business - The Employment Advisor - when changes to circumstances beyond their control caught them out.
By 2005, with two national clients and the injury-management software in its first stage of development, entrepreneur Miles Heffernan felt The Employment Advisor was ready for the next level of growth. He secured a competitive ten-year lease for a full floor of office space that needed a complete fit-out. Heffernan says: "The initial quotes I had weren't accurate and the fit-out was going to cost me three times what I had expected."
Money was also needed to continue developing the software package - and then the Howard government introduced WorkChoices. Industrial relations advocacy represented more than 50% of the business and suddenly that business was gone. Heffernan says: "We went from being in the [industrial relations] commission three times a week to no more than once a month."
With revenue down and expenses high by July 2006, Heffernan hit rock bottom. He says: "I had $100,000 worth of bills that I couldn't pay and that was going to be around $600,000 by the end of the year."
Read more about how Heffernan recovered from this difficult time (members): Helping Hands - Case Study
Areas of financial management to focus on
According to Ron Griffiths "Financial management is an important part of management that many managers or executives fail to understand. Generally it is assumed you need to be a skilled accountant to understand financial management, yet it is the area that managers/executives deal with (or should deal with) more than the accountant. There are 5 key financial areas that managers/executives need to understand to help them run successful businesses:
When we get this balancing act right and understand each of these key areas, then it becomes easier to have a successful financially-performing business." Ron has recorded an audio seminar that addresses each of these 5 key areas, found here (members): Finance For Non-Finance Executives
In her article (free) Seven Key Numbers To Drive Profit, Sue Hirst points out that: "A typical set of financial reports (i.e. Profit and Loss Statement and Balance Sheet) contain a lot of numbers, and it can be a daunting task to make sense of it all, and know which numbers are the important ones. Of course they are all important, but some are absolutely critical to financial success in business.
"The typical financials provided to most business owners are for tax purposes rather than management use. However, most of the ‘seven key numbers' are not contained in a typical set of financials, which is a frightening thought, considering they are absolutely vital to profit and cash-flow. This is because these numbers are ‘financial drivers' rather than ‘results'."
How are you performing? How can you tell?
"Where a business is experiencing a downturn, there are often symptoms of decline. These are the telltale signs or "danger signals", which should alert a business operator that they should review their business operations and, if required, seek professional assistance. Being aware of the symptoms of decline allows the business operator and their professional adviser to take remedial action and avoid financial crises before it is too late and the business becomes insolvent" says Partner at BDO Kendalls, Michael Owen. Read the full list here (free) - Symptoms Of Decline
To your continued financial success!
Have a fabulous week!
Kristine Szitovszky
CEO Online