The finance department is responsible for recording all the internal business accounting and bookkeeping transactions in the company’s accounting journals. This includes a myriad of activities such as sending invoices to customers and collecting payment, paying vendors and overhead expenses and distributing payroll.
While these are important and fundamental company functions, higher-level "CFO" responsibilities such as the management of the financial resources, profitability assessment, budgeting and forecasting are crucial to maintaining the financial health of the company. Unfortunately, for budgetary reasons most small organizations do not hire individuals with this level of financial acumen. It is this lack of financial management that ultimately leads to company failure. In other words, it could be said that the company failed due to a decrease in sales but actually, the failure is due to the company inability to recognize the pending decrease and make the required financial adjustments.
Larger organizations also experience sales declines but the CFO recognizes this through forecasting models. They may still experience a decline as they are forced to do a massive layoff or debt restructuring but they continue to stay in business allowing time to recover. Whereas the smaller company, lacking the financial sophistication, looses the advantage of time to make the required changes.
Such financial acumen can be available to small companies and may not be as expensive as perceived. There are various companies and independent consultants that function as contract CFO's and business forecasting models can be purchased. Additionally, some CPA's also function as business consultants and offer CFO type services.
To purchase EBooks on this and other business subjects visit www.BusinessSimplyPut.com
(See www.LWandAssociates.com and www.BusinessSimplyPut.com for more information).
Strategic plans built on faulty beliefs are sure to fail. Change can occur quickly and the average lifespan of a business model may only be a few years before modifications or a complete restructuring is required. With that said, change does not occur unnoticed overnight -- subtle clues (that are easily recognizable in hindsight) can be observed, allowing the organization the much-needed time to adapt.
It takes passion and commitment to grow a company and entrepreneurs must believe in their dream in order to overcome skepticism. Unfortunately, sometimes the same drive and ambition that built the company can cause its destruction. Over time business leaders develop a skewed perception of the company’s capabilities and position in the marketplace. Often this is due to the business leader’s internal fear—they will hold tightly to what worked in the past afraid to change, even if all evidence suggest the need for a new approach.
Successful strategic planning requires rigorous thinking and honest assessment. To avoid false perceptions, historical financial data and past performance is included in the process. People can lie to themselves, but numbers will always tell the truth.
Excerpt from the book, Planning Your Company's Growth A 10 Step Guide to the Strategic Planning Process , which can be purchased as PDF format on www.BusinessSimplyPut.com or on Amazon for the Kindle at http://www.amazon.com/dp/B005EJN03G
Bank financing has long been the coveted funding source offering lower interest rates and eliminating the need to forfeit equity. With banks balance sheets leveraged with questionable subprime loans the bar has been raised and many small companies that could have received bank financing a year ago --cannot today.
In conversation with a banker from a local regional bank (one that was fortunate to have avoided the mortgage debacle) we discussed the increase of loan volume from companies who have been asked out of their current bank. Many of the loans are good low risk loans, my banking associates said, but their current bank needed to reduce their leverage.
Several asset based financiers and other alternative lenders I spoke with said they also are experiencing an increase in loan volume and are able to charge higher interest rates for low risk loans. As associate who is involved in leasing said last year he was asked to compete with banks on interest rates, whereas today he is simply thanked for doing the deal.
This was further expressed during a meeting with a hedge fund manager who provides debt and equity financing to companies. He said he was getting equity type returns on what was actually a low risk loan.
The small companies that are still able to receive funding are paying more for their capital. With that said, small companies are less likely to pass the charges onto their customers, resulting in margin erosion.