Finance is NOT a dirty word

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English: break even analysis - multiple prices
English: break even analysis – multiple prices (Photo credit: Wikipedia)

You know the terminology- “go with the flow”? Well, that’s what we’ve done over the years. Some 40 years ago, our firm exclusively dealt with firms trying to develop new products or processes. Those efforts employed our expertise in technology, science, design, and management. (You need to know not just the sci/tech, but how to manage the process if you want to bring new products of processes to market.)

But, with time, we noticed major failures with our clients. (OK, we noticed mistakes with our own efforts, too- and I’ve discussed those before- often.) Many of our larger clients were afraid to jump into new technologies as easily as they claimed- and many of their executives began focusing on the ultimate short-term results- because their compensation was so tightly tied to the whims of the stock market’s view of their corporate value. We learned to live with that- and actually devoted one of our staff to work with the non-technology staff to insure that our projects stayed funded and in the corporate focus.

Our smaller clients had different problems. Many of them were headed by technocrats, with little business expertise. So, they failed to file their tax returns in a timely fashion, did not maintain accurate financial records, couldn’t lead their staffs, etc. And, since they were small, there rarely were non-technology types with whom we could liaison to insure the project success and completion.

So, we began offering these services to our clients. Temporary CFO or CEO services, accounting and taxation services, funding opportunities, and the like. After a few years of this expanded offering, we no longer were finding that the new products our clients were developing were running out of gas. Our clients were bringing their products to market AND staying profitable.

Which is why we want all of you to remember that accounting and finance are critical considerations for your business. If you don’t control these aspects of your business, you won’t be able to measure and assess your progress, you won’t know how to allocate resources for future needs or scale-up your efforts, or you won’t be able to make predictions about your future needs and profits. You need to know these efforts are not dirty words- but the essential lubricants to keep your company on target.

How can you attract the talent you need or want, if you can’t deliver a compelling story about the future- one that has the necessary assets, necessary funding, and customer needs in focus? That means you need to be able to assess the future aspects of your firm. What will be your revenues in the next year or two, what will be your operating costs, and what assets will you need to satsify those predictions- with the necessary capital to achieve those goals?

(Yes, a start-up only has “squishy” numbers. But, it’s easy to discern the steps needed to make these goals real- and put real meat behind the projections. As the company matures, one can use the financial statements, sales and cost trends, as well as analysis of existing operational efficiencies to make these predictions. And, the more one has a history of operations, the more reliable those numbers become as future predictors.)

Given these facts, businesses can convert those predictions into demand predictions, to determine what equipment and asssets are needed to meet the projected demand, lower costs, supply chain needs, etc. This means one needs to obtain venture funding or borrow money- which means knowledge of working capital needs is critical, as well as fixed assets (and their on-going costs) to keep the company going and growing. One needs to know the incremental costs and profits of each change in sales and operations- to know what cash flow is needed to meet those goals.

Of course, one needs to make sure the goals are being met. KPI (key performance indicators) that compare predictions to actual progress. Moreover, when you measure your progress, you can discern trends in revenue and operational costs- before problems develop or to exploit opportunities that would not be so obvious without these monitors.

So- are you ready to grow? We can help you develp your systems, train your folks, or provide the extra (talented and qualified) hands you need to sew these systems up- and make them the fabric of your organization.

Want more information?  Check out our main website, eMail us, or give us a call!
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8 thoughts on “Finance is NOT a dirty word”

  1. Excellent post Roy. Lots of people and businesses have ideas and products which could be profitable, but unless they think about the financial aspects they are more than likely going to fail. Some times people are scared when dealing with money and numbers, but without them a business cannot succeed

    1. The person still owns the ideas, Alessa. We NEVER sign the checks, we prepare them, we code them, we determine the best means to use the cash flow, but the stockholders (owners, president, chairperson) so they know that we are not doing anything that would be against the corporate- or stockholders’ interests…
      That gives them enough control so they learn to develop trust…

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