3 Key Warning Signs The Business Gurus Won’t Tell You About.

The problem with business gurus:

They offer great content (potentially) on vision, leadership, strategy, sales, marketing, people etc. but rarely give thought to the financial stability of a business. Why is that? Simply put, it is not in their interest to do so. If your business is not ready for what they have, and they tell you that, you’ll take longer to buy. Delay in sales may mean you don’t buy at all.

However strong finances and financial management are the foundation of business upon which all other activity depends. When undertaking business development initiatives you ignore the state of your finances at your peril.

What am I talking about?

Well, let’s take driving sales for example. Driving sales is a great and necessary thing. It (or rather the cash flow from it) is the lifeblood of any business. Generating sales solves a lot of problems. However, if you are not in control of your margin and cash flow, more sales can actually get you into trouble. You perhaps have heard that more businesses go bust when they are growing than when shrinking!

The problem is that few business owners are trained in understanding business finance. Those that are have usually learned the hard way!

What are some of the threats which may resonate with you which are beginning to flash at the edge of your radar screen and which may mean it’s time to have a chat with an experience qualified Finance Director?

What are 3 Key Warning Signs That Mean It Might Be Worth A Chat With An Experience Qualified Finance Director?

1.When feeling financially blind or partially sighted.

The first place to start is what’s your gut telling you? If you don’t have full visibility and control of each aspect of your business and it’s getting dangerous, you’ll normally have an unease in your gut or, to put it another way, a warning light at the edge of your radar screen.

Any business of reasonable size is at risk without, at least, accurate monthly management accounts. If these are done by your bookkeeper are you sure you know they are accurate? We recently reviewed a set of management accounts done by a bookkeeper which overestimated the profit by £80k for a £300k turnover business!

Do you lurch from one cash flow crisis to another?

If that’s not concerning you, then you’d better check for a pulse! It’s probably time to retire! We can help with robust and regular profit and cash flow forecasts to forewarn you as to what’s on the horizon. These are an essential tool for a growing business to manage growth, complexity, and survival.

2. Serious growth in sales and the speed with which sales are accelerating.

This is a classic situation where businesses get out of control without the requisite skills of a Finance Director. An MD may feel well able, with everything else he/she has to do, to control his business up to the first £100k or more of turnover. However, as sales grow beyond this and particular if that growth is fast, this becomes more difficult and the wheels can fall off.

We know you’re good……but you’re also human!

When things start to take off, sales have (rightly) been prioritised over accounting. To this point, the business may not have been able to afford sufficient specialist finance expertise. As a result, the MD is not getting the profit and cash flow reports and forecasts they need and is necessarily focused on driving sales. Without the right information on costs, margins may begin to suffer. Growth requires investment in overhead which takes some time to come back in profit and cash flow. One thing you can be sure of it always takes longer than you want it to! Counter-intuitively, the faster the business grows, the more cash it may consume.

The faster this happens without proper financial reporting, the greater risk the business loses money, gets out of control and has serious cash flow issues.

It’s no coincidence that there is a very high correlation between distressed companies needing turnaround expertise and a serious lack of financial data (annual accounts are not good enough to manage a business by!).

Sound familiar ? Give us a call.

3. Larger contracts, increasingly complex plans and more sophisticated stakeholders.

Bigger opportunities offer greater profit opportunities. They also however often entail greater risk. They require more complex financial analysis and risk mitigation before you get into them.

Payment terms are usually worse than normal. Do you have the cash flow to finance these opportunities? Are you sure? How do you know?

Because of their size, if these contracts go wrong your business may have serious exposure and they can ultimately bring your company down.

As you move into this complexity you are more likely to need to satisfy more sophisticated business stakeholders and 3^rd parties, like your investors and banks. Capital leads are hard to come by. Make sure your accounts, forecasts, business plans and other management information are robust enough to convince these people you know what you’re doing and are worth backing.

If any of this sounds familiar, we’d be happy to have a chat. If you’d like to speak to an experienced qualified Finance Director you can phone us on 0115 9480115 or book an FREE appointment straight into our diary HERE.