Are you getting the financial insight you need for growth?

Most business owners I come across have developed systems to control their finance – invoicing, payments and payroll.  The emphasis here is on control, and in doing so misses the bigger opportunity for financial information and analysis to aid decision-making. 

Financial management information is more than the ‘management accounts’, it’s the deeper analysis that spots trends, identifies problems, helps to discover solutions and forecasts different outcomes. Management information does not require a Management Information System (MIS), or a great deal of expense. It requires a rigorous approach to business data collection and modelling, together with the application of a few useful business benchmarks, indicators and tools.

Over the next few blogs I’m going to be asking – ‘Do you know?’ – highlighting a few important business finance health indicators that form the basis of financial management information package that can give you the insight you need for successful business decision making.   The questions include:

1.       Do you know: your defence interval?

2.       Do you know: where you’re making the most money?

3.       Do you know: the % contribution by customer?

4.       Do you know: your average payment terms?

5.       Do you know: if you’re paying suppliers faster than customers pay you?

6.       Do you know: how you would get more money if you needed it?

7.       Do you know: if technology is a help or a hindrance to your business process?

If you are unable to answer the ‘Do you know?’ questions, then it could be time to overhaul your financial management information to open the way for clearer insight and better informed business decisions.

Spreadsheet creep – a health hazard to your business

Excel is a great tool, it really is.  As someone who spends half their life staring at spreadsheets, I wouldn’t be without it.

BUT, and there is a ‘but’, I believe that spreadsheets need to come with a business health warning that says: beware of spreadsheet creep!

If you’re using a spreadsheet as the critical tool for business analysis and management information, you need to ask yourself these questions:

  1. How long has it been in existence? You may be surprised by the answer to this question, I’ve come across spreadsheets that have been evolving for over 10 years.
  2. Does the spreadsheet still reflect how my company operates, or have I made my company ‘fit’ the spreadsheet model?
  3. How many people have modified the spreadsheet model since it was first set up and are they still with the company?
  4. How much time is being spent updating and number crunching?
  5. Is it transparent, or does it include historical formulas that no-one quite understands?
  6. How big and how complicated is it? Could you explain the entire spreadsheet to your accountant if you needed to?
  7. Would you stake your business on the accuracy of the data?

Because here’s the bottom line: if your spreadsheet-based management information system isn’t fit for purpose, it could be driving poor decision making that’s detrimental to business growth and profitability.

If your business is afflicted by spreadsheet creep, please stop, seek professional advice and ensure that you get the management information you need for a robust business.


When the worst happens…why losing your biggest client isn’t the disaster you might think

It’s happened…you’ve lost the customer that provides 40%+ of your annual revenue. Many business owners have been in exactly that situation, and I expect to see at least one of my clients facing this every year.  When it happens it’s only natural to fear the worst – “This will mean the end of my business?”; “I’m going to have to let all my staff go”; “I’m not going to be able to take enough money out of the business to live on”.

But in my experience it’s not really the end, it’s the beginning of a new chapter in your business that will eventually make it better and stronger. So if you’re currently facing  this sort of situation, or fear that you might be at some point soon – I’d encourage you to read on.

Step 1 – Sit down, breathe.  Once you get over the shock and possibly the anger, it’s time to sit back and calmly assess the situation.  Your accountant can help you to see just how long your finances will sustain the business – and it’s nearly always longer than you think.

Step 2 – Take stock of the situation you were in.  Ask yourself the following questions (I think you’ll be surprised by the answers).

  • How much of your time has been taken up by this customer?
    Often you will find that they actually occupy well in excess of the percentage of income that they bring in. You find yourself going out of your way to spend that ‘little bit of extra time’ to keep them happy.
  • Did you charge for ‘the little extras’ that you gave to them? Probably not!
  • Have they been taking advantage of the fact that they are your biggest customer by making the time between payments longer and longer? If this is the case, have they really appreciated what you’ve done for them in any case?
  • Have you been charging them at a ‘special rate’? The answer is ‘almost certainly’.

Step 3 – Work ‘on your business’ rather than ‘in your business’; with that big client gone you’ll probably have a bit more time to do it. Some areas to consider might be:

  • Pricing: are you charging enough for the products/services you provide? Too many small businesses undervalue what they do.
  • Products: are there other products/services that I can offer to my existing and new potential customers that will be more profitable?
  • Promotion – spend some money on marketing! It might sound odd that an accountant is suggesting you spend more money at a time like this – but trust me it’s important to your recovery. Don’t think of it as a cost but an investment in your future income.
  • Firm up your other customer relationships – maybe ask them for feedback to help you improve your products and services. With happy customers you can also ask for referrals; if they are happy with what you are doing for them they should be more than happy to provide a recommendation for you.

Step 4 – Move on!  Rather than sitting back and moaning about how your ex-customer has ‘ruined the business’ change your outlook and be grateful for the opportunity (and more importantly the time) to make your business better and more profitable.