How to build credibility with the financial community

One of the keys to success as an entrepreneur is creating confidence and trust with your lenders, investors, and shareholders. They have to have confidence in you personally and be confident that you run a tight ship.

One of the fastest ways to kill that confidence is allowing the accounting and financial side of your business to drag you down. It happens all the time in business. Your energy and passion are focused on the marketing, selling, and the operations side of your business. Oftentimes the result is the financial side of the business is neglected. It performs at a much lower level because it is starved for talent and has not been forced to operate at the same level as you require of the other parts of the company.

The problem is allowing this to happen will kill your company and doom your growth plans if you don’t fix it. You have to remember that you need your lenders, investors, shareholders and your Board of Directors (I will refer to them generically here as the financial community) to support you and support your company. And to do that they have to have confidence in you. It’s your job to work every day to build their confidence and trust in you because they are the lifeline to the cash you will need to grow your business and execute your strategy.

Here are some common accounting weaknesses and how they will hurt your credibility:

• Providing financial statements slow and being inconsistent about when you provide them – this will undermine the confidence you are trying to build because it looks to the financial community like providing insight into your financial results is a low priority for you. Remember, they have money on the line and if they think their needs are a low priority for you I promise they will take that personally (which destroys confidence rather than builds it).
• Having numbers bounce around such that the numbers often change for a particular month after they receive them – this will drive them crazy. They won’t trust the numbers if they know they are seldom accurate. And they will assume you are not paying attention to the numbers and that the financials must not be important to you.
• Having big adjustments occur in the last month of the year – when this happens it tells the financial community that all the monthly financials they have been receiving were WRONG. It screams out at them that you don’t have accurate financials each month and that you are relying on someone at the end of the year to come in and try to fix them for you.
• Not being able to answer their questions about the financials – it is very scary for the financial community when they ask questions about the financials and they get a blank stare in response. You want to get their attention by having the answers roll off the tip of your tongue. It shows them you know what’s going on in the business. It gives them a big dose on confidence when you understand what the numbers are saying and that you can clearly articulate the link between your strategy and your financial results.

Building credibility with the financial community means you want to make their life easy each month.

You want to make it easy for them to clearly understand and monitor your financial results. That addresses their need to manage their risk and be a team player with you. They love that. And when you proactively take good care of them every month, they will reward you over time by being there when you need them.

It’s like making deposits in the “confidence” bank. You want a nice big balance in there because you never know when you might have to make a small withdrawal. Maybe an unexpected challenge comes up or maybe a big opportunity appears and you need the financial community to supply some cash and support the company. You want to build the trust and confidence now so it is there for you when you need it.

Now is the time to raise the bar in the accounting and financial side of your business. It will pay huge dividends for you and make your company even stronger than it is today.