Losing Money?

It’s a commonly used phrase that I did not coin, but I use it all the time.  “What gets measured gets managed.” 

Over my career, I have worked with for-profit organizations as well as non-profits.  No matter the corporate structure, all organizations need to live within their means in order to continue as a going concern.  Many organizations I’ve worked with have expressed concerns about a lack of cash.  They may say it in different ways – no money for pay raises or new programs, dwindling bank account, not hitting budget, etc. – but the gist is the same.  Something seems off. 

I have found that often it’s due to a lack of awareness of the driving forces of their business or policies and procedures are either not in place or they’re being ignored.

This article is a high-level summary of helpful hints if you’re struggling with cash flow.

Overall, your company needs to apply a disciplined approach to the organization.  What gets measured really does get managed if you are committed!  As I see it, the following is a brief list of high level strategies to review, all of which is a separate topic that warrants further discussion:

1. What are your financial objectives? Good budgeting is necessary in order to quantify goals and to set the stake in the ground for management.
   
   
2. Right people in the right places – Finding quality staff that fit well within the organization is key. There’s a reason there are so many placement recruiters in the market. Good people are hard to find, and it is very time consuming to find them. People that both understand financial matters and can articulate them in a way that is easy to understand can make an immediate impact on an organization’s results.
   
   
3. Good protocols around purchasing, billing, and payroll – I’ve seen companies see immediate improvement with setting good systems in place and then enforcing them. Setting deadlines, purchasing limits, hiring discipline etc. will make a big impact.
   
   
4. Good reporting and monthly close process – leave it to the accountant to talk about GAAP (generally accepted accounting principles) but accounting concepts are there for a reason. It standardizes all financial transactions and when properly presented, helps a manager understand how revenues match up with expenses. Many of my readers will say that sounds so basic but I’ve learned that many organizations are challenged with this. I hear it all the time: “We do financial statements once a year for the audit”, or “We’ve never looked at our balance sheet”, or “We only do cash basis and convert to accrual basis at year end.” These are common situations I encounter. Without complete financial statements, it’s difficult to understand the financial story. I’ve found that once financial statements are developed they start to tell a story that management didn’t previously see.
   
   
5. Follow up and follow through – When prepared properly, balancing succinctness, quality, & effectiveness, financial reporting and the results will tell a story. It’s important to put systems in place to review these results, drill down to key drivers, and ask managers to make necessary changes to respond to shortfalls, etc.
   
   
6. Respond to changing conditions and opportunities – an organization’s operations are fluid. Change is constant. It’s important to remain flexible while at the same time remaining committed to living within its means. Challenges and/or opportunities will come up. Having good information will help management respond effectively.
   
   
7. Repeat, repeat, repeat – Once systems are in place, it will be important to remain committed to these disciplines as tried and true best practices. I’ve seen companies lose their way, and upon further review, usually something on this list was dropped in one way or another.
   

Each of these matters can and should be further analyzed, and there are likely other best practices to consider.  I do know that these best practices work. I’ve seen it multiple times. I’ve had clients look back and wonder what took them so long to implement these best practices. 

If these topics resonate, and you think you need some help, I would be happy to discuss. I can help with processes, financial reporting and analysis or helping you find the right people.

Send me a note with your thoughts. What other topics would be helpful to you?