By Andy Burrows
As I’ve spoken with Finance professionals around the world about their careers, there’s a particular pain that is felt by those who work in small businesses.
Sometimes they talk about the fact that they want to be Finance business partners, but they’re stuck in the mundane tasks of Finance.
Sometimes they talk about the struggle they have trying to get involved with the business, because the business doesn’t see the need to include them.
There’s a perception in some places that to get real Finance business partnering experience you have to go and work in a bigger company.
But that cannot be right!
In the USA, 45% of GDP comes from small businesses. Nearly 50% of employees work for small businesses. And I bet the situation is similar around the world, possibly even more so.
Imagine the impact we could have on the economy if small business Finance professionals could help their businesses to perform better. And I believe that’s possible! It’s our responsibility!
So, this article gives you six statements to stick on the wall and keep reminding your business colleagues about. And in doing so, whatever your regular responsibilities, you will help your business to perform better. And that makes you a great Finance business partner!
And then I’ll round off by telling you why I think that - even though Finance in big business may look more complex and technical, with big processes, ERP systems and data analytics – business-focused Finance boils down to the same things.
First, your business has to make a profit. If you don’t make a profit in the long term, you would have been better off if you stopped doing business.
Ok, in the early days you may start off with losses while you are winning customers. But if you don’t start making profits soon enough then you will run out of money. Investors and lenders don’t like putting more money into businesses that are not profitable.
Remember, the definition of making a loss is reducing the owner’s/investors’ capital. And you’re not in business to end up with less money than you started with, and neither are your investors.
So, don’t let your non-Finance colleagues ever lose sight of that, especially the Board, the CEO and the owner.
To you it may be obvious. But trust me, it sometimes isn’t that clear to non-Finance people. And it’s tempting to let them get on with it, and at some stage the business will be past saving.
Second, whether your business is big or small, if it runs out of cash the business is finished.
Cash is like the fuel in the car. Once it has dried up, the car is going nowhere, whether it’s a brand new Lambourghini or a 1995 Vauxhall Astra! In other words, it doesn’t matter how good the business is, or the idea, or the employees. If it runs out of cash, it’s dead.
If you are trading at a loss, at least you are still trading! If you have no cash, you are not trading at all.
As a Finance professional, you know this, and you can articulate it very well. Your non-Finance colleagues need it drummed into them.
So, you can be a big help to your business by:
The third fundamental principle – something to nail on the door of the Finance department, like a manifesto(!) - is that planning is essential, whether you like it or not.
You have to know where you want the business to go and what you want it to achieve.
And then ask yourself how it is going to achieve it.
Don’t let them get away with a spreadsheet forecast, or something on the back of an envelope, or in the CEO’s head (I know this happens)!
A forecast is not a plan!
“Strategic objectives” or “strategic priorities” are not a plan!
A plan is a set of actions that you, as a business, believe should lead to the financial outcomes in your spreadsheet.
So, help your business leaders with detailed questions until you all know exactly what you need to do each day, week, month and year to achieve the vision.
Many businesses fail because they didn’t have a plan.
In fact, there is a saying: “those who fail to plan are planning to fail!”
Fourth, ditch the fluffy kitten poster on the wall and replace it with a big poster that says, “a plan is no good if you’re not going to stick to it!”
Obvious point, but worth making. A plan is pointless if you are not going to follow it.
You, the Finance people, are in a position to keep challenging your business colleagues to make sure the plan is detailed enough to follow, but flexible enough to allow changing course if it’s not working as well as you expected.
And in Finance, in businesses big and small, we’re in a position to help to get everyone on board, understanding the plan and buying into it.
And then we have to make sure that we’re all following the plan, and not getting distracted by new shiny objects or obsessed with details that don’t have a big impact on performance.
That discipline adds value. And even in small businesses Finance professionals can do this.
Fifth, measure your success against the plan.
That’s a positive and a negative.
You must measure your success against the plan.
But you should not waste time measuring things that don’t tell you how well you are performing against that plan.
Your plan should include every important element in moving the business towards your visionary objective.
It’s your particular role in Finance to look after the income statement, the balance sheet, the debtors list and the cashflow forecast. They’re not particularly helpful to your non-Finance colleagues in following the plan to achieve the business vision.
Others in the business will need to define and decide on other metrics, and those metrics should relate to the unique business and the unique plan.
Just ask yourself how you will know whether the business is succeeding for each key element of the plan.
Remember, we call them KPIs (Key Performance Indicators) for a reason – Key because they’re important! Performance Indicators because they tell you something about performance against an objective.
It may seem weird to your non-Finance colleagues that you don’t want to talk to them about financial numbers. But you are in a position, as a Finance professional, to help them link the business plan with metrics that will help them to know how well they’re doing.
Finally, another phrase to nail to the door – what’s the value?
It goes back to the importance of making a profit. And it’s about cost control.
But talking about cost control just gives you the reputation as someone who enjoys saying ‘no’! They start thinking that you just love “holding the purse strings”!
And it’s a case of using different language, rather than doing different things, necessarily. It’s a mindset thing. You can apply this in a small business just as much as a big one.
So, the big question when you’re asked whether the business can afford something is not whether it’s in the budget, or even whether there’s enough money in the bank.
The big question is ‘what’s the value’?
Broadly speaking, if the spending does not either help to keep you in business or contribute to increasing your profit in the future, then it is not going to help your business. So, don’t do it!
Sometimes this is a subjective judgment, and sometimes you have to accept that.
But helping people in the business to have that frugal, value-based, mindset will mean that you are probably going to get it right mostly, and you will have a more profitable and more successful business because of it.
And using this language will give you the reputation for wanting to help the business to perform better, to add value, and not just stop people doing things.
Sure, this is all obvious, ‘noddy’ stuff.
But how many businesses have failed because they were trying something fancy and neglected the fundamentals?
The most important thing to grasp, as a small business Finance professional, is this:
Even though being a Finance Business Partner in a large global business may seem sexy, all about data, predictive analytics, delivering insights from complex analysis...
... essentially it all comes down to the same responsibility for business-focused Finance professionals, whether in big business or small:
Drive business performance through business performance management discipline.
I hope that all that seems easy enough to do, whether you’re a Finance professional in a small business or a Finance Business Partner in a big business.
But to build on those fundamentals, it will help you to develop what I call business-focused Finance skills.
In particular, learn:
And I’ve got some other material that can help you with that – see below!
My free pdf short guide – How Finance Can Drive Business Performance
Andy Burrows is a popular writer and speaker on a wide range of topics in Business Finance and Accounting. He provides online training and coaching, through the unique My Finance Coach service from Supercharged Finance.
He was named as one of the top voices on LinkedIn in 2019 in Finance, Accounting and FP&A.
Qualified as a chartered accountant, Andy has worked in many senior Finance roles over the last 20 years, including Finance Director at one stage, across many different sectors in a variety of companies.
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