If you were to ask budding founders what their business objectives were in their corporate infancy, business growth would feature heavily.
So what should a good Finance Director be providing you with to alleviate this financial blindness
Firstly, your FD should produce a budget, which is meaningful. Did you pluck a revenue figure from mid-air? Or is there a list of targeted clients this is going to come from? The more detail there is driving your budget, the better. A new business target of £500K is utterly useless if no one knows where it’s going to come from.
Commentary and Analysis
Your FD should be including commentary with your monthly P&L against budget. What wins and losses were there? What did you learn as a business? If you lost a client, why did that happen? What can we do to make sure other clients don’t go to a competitor? Your FD should be identifying where the risks and opportunities lie. For example, I once had a client, which was a small group of companies. There was one large customer, which each business unit happened to share. I had heard the client was not very happy with the work from one of the business units and was threatening to leave. I highlighted that as a group this client was responsible for 60% of the group’s business. If they left, it would affect the whole group and showed them what the P&L would look like if this client left. The Chairman immediately booked a meeting with the client the next day and restored the client relationship.
Another useful analysis is that of margins.
Do you know which of your products or services are profitable and which are not? If you know, you can then take actions such as raise prices, renegotiate with suppliers, or really push sales of high margin products.
These types of analysis, such as identifying key risks and opportunities, is an essential part of financial reporting, which you should expect on a monthly basis.
If you receive quality reporting as outlined above, you have better control of your business. This gives you an advantage over your competitors and increases your chances of success and growth.
Sophie Wright –
Portfolio Finance Director & Founder of WrightCFO Ltd.
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