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By Shane Bender

Why do businesses get into financial chaos?  How do we avoid falling into this trap?  In my 20 years working with organizations of many sizes, I have seen similar issues. I wish I could keep people from falling into these traps, but sometimes, no matter what I say and do, it still happens. I write this blog today as a reminder to myself and all owners and executives to be on the lookout for these traps. If we can avoid and work to improve the following five areas, you will experience more peace and less chaos in your organization.

1.  Communication Breakdowns

What do I mean about communication breakdowns related to Finance?  Does your organization have regular meeting to discuss the financials and go over any challenges and projects?  Are the right people being engaged to understand what is happening?  Communication is the key to success in any organization. I suggest that each company have regular meetings, either in person or online, to discuss key financial issues. You would think this is common sense, but sometimes these meetings fall to important issues with customers or other priorities. Depending on the size of the company, weekly or monthly meetings are necessary.

I have also seen email used as a process for communication, and I would recommend not letting this be the only communication. An email with many people copied can be very ineffective, and there is no way of truly knowing if they understand what is being communicated.

2. Redundant or Inconsistent Processes

Do you have processes that have multiple people doing the same thing? Or maybe you set up a new process, and it is not being followed or is being regularly changed without discussion or approval. When this happens in the Finance world, bad things happen. For example, suppose there is a change in the billing process and how invoices are entered without talking it through with everyone. This could lead to issues with collections, accounting, sales tax, etc. Customers could get frustrated, and the cleanup could lead to very time-consuming work.

Process documents should be created and communicated to everyone.  As a business and staff grow, there will be changes, but the process gets documented and changed. It is important to get everyone’s input and discuss the pros and cons of the change. We want to get buy-in from all the key people involved in the process so that it gets implemented correctly and consistently.

3. Lack of Collaboration in Financial Decisions

You could say this is a continuation of number one, but I broke it out for this reason. I am a strong believer in a working forecast model that gets discussed on a monthly basis. You can scroll to the bottom to see more about my course and book.  When there are changes to existing and new revenue opportunities, the forecast model should be changed. If there needs to be hiring or additional expenses, it needs to go through the forecast model. The forecast tool will not only be a great communication tool, but it helps objectively see financial and cash flow issues on the horizon. I strongly suggest collaborating with your Executive Team on key financial decisions.

4. Stuck in the Details

Sometimes we can spend our time on an issue that is really not important in the big picture. Maybe it an issue with small expense when there are many large expense issues. Maybe there are some projects that you are spending too much time on, but they have a little financial impact. Sometimes we just get stuck answering emails and other people’s concerns and we don’t have time to be strategic and look at the big picture. A good working forecast model will allow you to see the bigger picture, and then you can drill down if you see issues.

5. Complacency 

When there is cash in the bank and profits are high, we tend to get complacent. It seems to be a human challenge that we just need to be aware of.  The best way to avoid complacency is with consistency. What do I mean by this?  Just keep meeting and reviewing the financials and forecasting in good times and bad. Look at financials from a conservative perspective which sometimes forces you out of complacency as you see a potential cash flow issue on the horizon. The worst thing to do is stop meeting with your key executives and being too optimistic about all the sales goals.

I am a fan of high sales goals to push people, but what if they don’t happen? What if we over hire and spend too much and then we go through a revenue drought or lose a key customer. We have to be aware of this and have a contingency. A conservative forecast model will help in this area. I have been told I was being pessimistic, and I am not saying you have to live in this conservative view. I like having an abundance mindset, but not stupidity. You have probably heard that “hope is not a strategy.”  There have to be reasonable actions to support a properly communicated strategy.

Final Thoughts

I started my CFO business, but I want all businesses and nonprofits to succeed. I hate to see failure and cash flow problems, and I have been thrown into many of these situations. Of course, it takes the whole team to accomplish true success in any organization. With good communication, consistent processes, and collaboration, you can begin to move in the right direction. With a good forecast model to see the big picture and key challenges, you can avoid complacency and experience success.

 

Forecast Your Future Course

Do you desire to gain a better understanding of where you are today financial and where you are headed in your business? Would you like to reach your financial destination quickly? Do you desire to grow revenue, spend wisely, and manage cash flow? Check out the Forecast Your Future Course for more information.   Also, check out my book Forecast your Future: How Small Businesses Exchange Stress and Chaos for Cash and Clarity.

Coming soon is my audiobook Forecast your Future: How Small Businesses Exchange Stress and Chaos for Cash and Clarity. If you want to hear more about this, be sure to sign up for my email list if you aren’t already.