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Floyd Talbot
Business Financial Management & Strategy
Elk Grove, California
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Keeping a 360° Eye on Your Business

Insight, hindsight, and foresight are three critical focus factors for keeping an eye on your business.  Their lack invite the fizzle factor to engulf it and send your firm down the slippery slope of an exit strategy.

Written Apr 06, 2008, read 2497 times since then.
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In today’s ever-changing business environment, planning has almost become a lost science. Time and the rush to market trumps thorough and rigorous planning. It has become the stepchild of management, cast into a corner until the next crisis arises and cash flow takes it toll on the firm. Marketing takes center stage for capturing the next customer and causes an imbalance to occur in the allocation of resources for successful business execution. 

Encountering and engaging your clients and competition require focused planning with the proper tools, effective communication, sufficient resources, and useful measurements for gauging your performance. Are you prepared to encounter your competition and engage your customers, bankers, and vendors in business? Do you have a sharp mission focus? Do you have clearly defined and attainable objectives by which you measure your success? What are your top three challenges that nag at you and stand as obstacles toward reaching your business objectives? How are you overcoming them and moving forward successfully?

In my years of business, I have encountered numerous small businesses whose cash flow inhibited them from growing, who fuzzy outlook on their financial condition and performance, or whose working capital reduced from year to year, causing them continued stress over the prospects of their business. The top reasons for their struggles consisted of:

  • A lack of accounting or finance knowledge
     
  • The failure to plan beyond a few months
     
  • Not knowing their markets and how to reach them
     
  • Not having clearly defined and measurable objectives
     
  • A cash burn rate that outstripped their financial resources

The last of these I call the fizzle factor. A continuing challenge exists between balancing business management infrastructure and market presence. If a rush to market outruns its infrastructure, the business could sizzle through its financial resources before getting its products and services to market. 

Today’s financial volatility lends to numerous short-term unknowns in the planning process for the small business. Businesses must adapt quickly to changes in financial conditions, technology, and the various means of marketing to gain traction in its markets. That is the reason management becomes so vital for the enterprise and entrepreneur. That is the reason for insuring that a sound infrastructure is in place for supporting sales and marketing efforts, such as the use of technology, capital requirements, financial controls, and strategic planning. The outlays for these structural elements enable owners and managers to manage the firm efficiently and expeditiously.

The Small Business Administration performed research on the issue of business failures and bankruptcy. Among the reasons it discovered were lack of planning, trade credit issues, poor cash flow, poor recordkeeping, and failure to use advice. [1] All of these reasons can be summed up in the word management. Peter F. Drucker writes, “[Management] has to think through the institution’s mission, has to set its objectives, and has to organize resources for the results the institution has to contribute.” [2] 

What does first-rate management look like? It really boils down to insight, foresight, and hindsight, that is, having a 360° eye on your business. Hindsight means having accurate accounting to measure your past performance. Accounting has several complementary components without which it cannot be useful and produce accuracy: management controls, an accounting systems that fits your business, and organizational discipline. 

The first factor, accounting, appears obvious to business managers. However, obvious does not equate to priority and enterprise-wide application.  Business managers realize the need for recording and reporting on revenues, expenses, assets, liabilities, and the firm’s capital. However, managers frequently overlook several critical issues in making accounting software selection and implementing accounting practices. Two major issues are a) insuring that financial controls are rolled out in every department and function of the business and b) insuring team effort rather than independence of effort. 

Every event in the business has a cost and each business function contributes toward the revenue stream. Events spur requirements through processes. Requirements and processes incur costs and generate revenue. Revenue requires costs. Customers provide the revenue. Bankers serve as intermediaries and sources for capital requirements to support customer acquisition. Vendors provide materials and services for customer products. An adequate accounting system records all the economic events throughout the business, both on the revenue and the event side. 

Financial controls insure that all functions head in the same direction and support the firm’s objectives. The accounting system and financial controls must be implemented in tandem to insure successful financial management. 

Insight refers to technical knowledge and administrative know how. A business owner or chief executive officer builds the business on technical know how. Administrative know how is often a weak link in the business. To make up for this weakness, the CEO hires an administrator in the form of a Chief Financial Officer or Controller. Smaller businesses who cannot afford a full-time Controller engage someone to manage business on a part time basis. 

Administrative know how cannot be neglected or given secondary priority in business. Planning, tools, communications, and measurements are instrumental in sound business administration. They manage requirements, capital, revenue stream, costs, processes, and constituents.

Foresight signifies the planning process. Any startup business requires initial capital to meet its early financial obligations. This is to be expected and should be factored into operating cash requirements. However, from the startup stage of the firm forward, business owners or managers must always face the tension between the speed of generating a revenue stream and the costs in obtaining that revenue. Limited cash and its burn rate places tremendous pressures on the firm’s managers to ratchet up the timing of product release. That is the reason initial capital becomes vitally important.   Strategic planning paves an effective path for revenue generation and financial management. It crystallizes the company’s mission, sharpens its objectives, identifies its strategies, and provides the financial targets for its future.

Insight, hindsight, and foresight do not apply only to large corporations. It is especially pertinent to the small business environment. Small businesses do not have large financial reserves and frequently operate on minimal capital. Such streamlining and cost savings resulting from financial controls, enterprise-wide accounting, and strategic planning provide such enterprises with greater flexibility to meet the demands of their markets. Therefore, when an economic downturn occurs, they are better prepared to meet the leaner times and see their way through them. During times that are more prosperous, effective planning, effective financial management, and financial controls set the course for greater wealth production and market penetration.


[1] Bradley, Don B. and Chris Cowdery, Small Business: Causes of Bankruptcy, n. d., p. 211.

[2] Drucker, Peter F. The Daily Drucker: 366 Days of Insight and Motivation for Getting the Right Things Done, HarperBusiness, 2004, p. 18.

Learn more about the author, Floyd Talbot.

Comment on this article

  • Undress the Stress Coach 
Surrey, British Columbia Canada 
Marianna  Paulson
    Posted by Marianna Paulson, Surrey, British Columbia Canada | Oct 24, 2008

    Floyd,

    Your article highlights the importance of having a system in place, so that when something happens, one is not scrambling to find ways in which to deal with the issue.

    Much like what I do when I teach people stress transformation techniques.

    Build the habits and then have something to rely upon when the going gets tough.