Run a quick Google search and you’ll find thousands of articles on how to properly manage your your company’s finances. There’s so much information on the topic, in fact, that it can be difficult for business owners to know where to start. But sometimes, simply looking at the challenge from a different angle can offer new insights on how to improve.
So, rather than focusing on the proper financial management strategies that an ideal business owner would use to keep their organization running in top shape, let’s ask a different question: What would a bad business owner do in order to run their organization into the ground? What would it look like if you were purposefully managing your business with the express intent of maintaining a sloppy accounting and financial function?
Though you’re probably not purposefully doing these things, many growing businesses are being built on a shaky accounting and financial foundation. And this happens more from neglect than a purposeful, intentional desire to create a mediocre financial function within the company.
Back to the question at hand: If you actually wanted to create mediocrity in your accounting and financial function on purpose, how could you make that happen?
Cash flow expert Philip Campbell put together an excellent plan to pull that off:
- Let’s be slow in preparing financial statements. This way, by the time we see a problem, it’s too late to do anything about it and the problem has had plenty of time to fester and get worse.
- Let’s provide financial statements that are less than accurate. This will ensure that no one actually knows exactly what’s going on. After a short while everyone will lose confidence in the way the financial side of the business is being managed.
- Let’s change the numbers frequently. We’ll put the financials out for the month then change them frequently. Frustration will set in as everyone sees the numbers bounce around, and they’ll become confused about what the financial results really are.
- Let’s be inconsistent about when we provide the financials. That way nobody really knows when to expect them. It will help them better understand that we don’t consider financial results to be all that important.
- Let’s send the financial statements out to our partners, investors, and bankers without a written overview of the results. We’ll just give them the numbers and let them try to figure out what’s going on in the business. That way, everyone will be in the dark about the company’s progress.
- Let’s exclude any comparison of the financial results to budget, prior year, or prior months. That way it is difficult for them to understand our results in the context of our plan for the business.
- Let’s leave out any information about the underlying drivers of our financial results. That way they never understand how our business really works.
- Let’s never provide financial projections. That way no one understands what lies ahead for the business.
- And most important of all, let’s not provide any information about our cash flow. That way the flow of cash through our business is always a mystery for everyone.
Just follow these steps, and your business will be on the way to financial chaos in no time!
All jokes aside, Philip was trying to get the attention of business owners with this list of what not to do. The question is, are you guilty of doing any of the things in that list? If so, it can sometimes help to turn things around and look at what you’re doing, as if you were doing it on purpose, in order to get a fresh perspective.
A strong accounting and financial foundation will help you win financially in business. It’s not about winning any awards in accounting — It’s about creating a company that is firing on all cylinders (not just a couple). Now’s the time to recommit yourself to making your company strong, so you can turnyour accounting and financial reporting function into an asset that helps you win.