Those without financial forecasting or investment expertise easily liken the skill to being nothing short of clairvoyance ? probably because so many wealthy and well-published business people have credited their ?gut instincts? as the source of their success. ?The truth of the matter is far less mystical,? says Kevin Phillips, MD of idu Software. ?I believe that there are 5 key steps to improving your company?s financial health.?
1. Embrace transparency
You cannot deal with problems that you aren?t aware you have. Self-serving executives have traditionally resisted transparency and hampered middle management?s access to information, perpetuating the myth that only the most senior or well-trained corporate guru at the top has the ability to understand and interpret financial information.
Transparency and accountability should not just be clever phrases stuck onto the wall at reception in your mission statement ? they should be values to live by. If managers and employees have access to accurate, up-to-date information (financial or otherwise) they start to feel something extremely powerful: a sense of ownership. Employees intuitively know when information is being concealed, and the rumour-mongering that follows is often more harmful than the truth of the matter itself. Empowered employees are effective employees.
2. Adopt a culture of listening
Listening ties into transparency. When there is honesty and visibility, there is nothing to deny ? only facts, which can be explained and used as a learning curve. If, for example, a manager has exceeded a budget, it begs an important question. Was the budget realistic? Or did the manager make a poor judgment call? The difference between knowing the real reason for a problem and knowing the reason put forth with a positive ?spin? is that you can actually resolve the former ? the latter only leads to a wasted, misguided effort to rectify a problem that doesn?t exist in reality.
3. Do not work in isolation
We?ve all been witnesses to grand top-down strategy that floundered because the people tasked with implementing the vision knew it was not grounded in reality. Vision should be both inspiring and realistic ? with facts and figures as the foundation. Organisation-wide ERP systems are often too complex for managers to understand, who end up misinterpreting the information and following their own, somewhat flawed, spreadsheets.
These systems may work within their individual silos, but can lead to chaos when all the various departments attempt to consolidate the data.
Create a central, intelligible space where information can be stored and shared. Make sure that you know how your actual performance relates to your budget on a daily as opposed to monthly basis. Information is transformative ? it is persuasive, it inspires action and it clarifies goals and expectations for all parties involved. If you want your staff to pull together as a team ? equip with them with the right tools.
4.Don?t be tempted to micromanage your way through tough economic patches
One of the most fascinating effects of a recession is that fear could drive leadership from viewing their employees as valuable team members, and starts viewing them as autonomous workers with targets to reach. Spending becomes lean and managers turn into watchdogs.
It doesn?t take a HR guru to tell you that this is almost always counterproductive as de-motivated employees are less efficient than their counterparts. I?m not suggesting adopting an indulgent approach when it comes to budget, but rather adopting a smart approach in terms of cost management. Rather than controlling managers, give them control over their individual budgets. After all, only the manager really knows what costs could be effectively cut. The centralised system mentioned in my last point will empower them to make the right decision (that you may not be able to make without their insight) whilst you remain able to keep a beady eye on the overall financial health and spending of the company.
5.Control the tremors, not the earthquake
Most companies take it at face value that they can examine June 1st expense figures sometime in the middle of July, when the books are close and the report is due to be presented to the board ? don?t. That means that if bad debt, fraudulent dealings or some sort of theft out of the company coffers exists, it will take a costly extra eight weeks before anyone notices and puts a stop to it.
The days of paper files and ledgers are long gone. If you expect to manage your business, you need to be aware of what is happening right now and not two months ago. Make sure that there are tools, people and processes in place to alert you when something goes wrong ? on the day it does. Knowing something after the fact, when the damage has already been done, is useless. Risk management isn?t a lofty ideal; it?s a reality with the right tools.
Conclusion
All successful business strategies ? from marketing right down to budgeting ? are rooted in accurate information. As powerful as their ?gut? may be, you?ll find that the most successful businesspeople have been the most informed ones. We?re living in an era where circumstances can change on a daily basis and we cannot rely solely on instinct to keep up.
Gauteng Business News
Source: http://bizco.co.za/improving-companys-financial-forecast/
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