In part 1 of our blog we asked our VP of Operations 5 questions regarding his job. In part 2, we asked our VP of operations to elaborate on question #2: As a Senior Consultant, what is a challenge that you see is common among your clients?
I’ll use an analogy. We talk of business ownership as a journey with a destination. You cannot get “there” without directions. Many small and mid-sized business owners may have a general idea of what they would like to accomplish, and most are excellent at what they do. But they have devoted little or no time to building a strong fiscal management system within their organization. They tend to have detailed operating procedures for procurement, production, and sales growth, but the quality of their accounting systems lag. Business is dynamic, and when change or growth comes, those who have not built out its fiscal management arm is sure to encounter frustration.
With the term “Fiscal Management” we refer to an organized system of retrieving and analyzing financial information, to facilitate decisions. It includes accurate and proper management accounting, measurement of key performance indicators, and financial forecasting based on sound assumptions. Every business needs these elements, and every business will eventually reach a point at which the absence of these elements results in some kind of failure. In the travel analogy, we would call this “going off course”, which creates additional cost, lost time, and puts the entire journey at risk.
Small and medium-sized business owners often have their entire personal net worth at risk in the business; as such, they can ill-afford the time and cost of drifting too far off course – or even worse, the catastrophic risk of not knowing when they are off-course. They need a financial road map in place. With a commitment to Fiscal Management, entrepreneurs at any stage of their business can take control of problems, challenges, and past failures, and they can press forward knowing that their future decisions will be guided by authentic data.