We all like to be surprised – fun birthday celebrations, running into an old friend you haven’t seen in years, winning the lottery on a scratch off. These events evoke feelings of happiness or fond memories. But what about surprises in your business?
You know the ones I’m talking about. Someone calls in sick on the busiest day of the year or your CPA tells you that you need to write a six-figure check to the IRS, including interest and penalties. No way, we don’t like these at all. What if I told you that financial surprises are totally preventable?
Getting rid of them is all about focusing on the fundamentals: the right people, the right tools and the right process. Having these in place will eliminate those bad financial surprises.
1. The right people. You don’t ask your landscaper to rewire your electrical panel, do you? Of course not, so you shouldn’t expect your bookkeeper to design and analyze metrics and trends and plan your business’s financial results and exit strategy. You’re not going to get a clear picture of your business if you don’t have the right people with the right expertise on your team.
2. The right tools. Is your business just meandering through the year, hoping that this month’s results are going to be better than last month’s, without anything being done to impact them? That’s like wandering through the wilderness without a map or a GPS.
You need planning tools to help guide your business. A budget, strategies, a succession plan, and an exit/transition plan. These tools can help increase the profitability of your business. You also need to put the right measurements in place – that’s a type of tool as well. The right measurements are going to be the gauges on your dashboard that you monitor to understand what’s going on in your business. 3. The right process.
Financial management of your business is a continuous process and it involves: Measuring what’s important. Figure out the metrics that drive the productivity and profitability of your business and put those measurements on auto-pilot. Monitor your numbers. Keep track of your important metrics over time.
Pay attention to them on a regular basis to get an accurate picture of how they work and what they are telling you. Analysis. In this case, analyzing means comparing your numbers to things such as benchmarks, targets, or the prior year’s budgets in order to figure out how your existing numbers stack up to your expectations. Putting course correction into play and into place.
This is a result of the analysis that you just did. Find the root causes of any issues that are making your numbers deviate from your expectations. Then fix the root causes in order to move forward with different, hopefully better, results.
Coaching: Coaching is not only giving feedback to your organization, but also validating the measurements that you’re taking. If there was a course correction, you want to make sure you provide feedback and coaching along the way so that that particular measurement doesn’t go off the rails again.
You’re putting in place something that is different, and we all know that it takes about 3 weeks to change a habit. We want to make sure that you put the right habits in place going forward so that your company will reap the benefits.
The next time you go through and measure, each evaluation will be better than the last. By having these three pillars in place, you can have complete confidence knowing that there aren’t ugly surprises lurking around in your financials.
Your numbers can grow with confidence! Want to see positive growth in your company? Contact Patty to get started.