Financial Habits of Highly Successful Companies
I have seen a lot of successful and not-so-successful companies in my career as a CPA and Certified Merger and Acquisition Advisor. Some of the more successful ones had excellent financial 'habits.'
Though some of these companies were large publicly traded companies, any company, large or small, can benefit from these ideas:
Look forward
It's easy to get in the habit of reviewing your financial results each month and thinking you are doing enough by understanding the historical results. Successful companies focus on the future. They use historical results to project where they are going and gauge the results of their earlier decisions. You can do this by preparing an annual budget and periodic forecast (approximately one per quarter). Each month, compare actual to budget and actual to forecast to re-evaluate your decisions in the future.
2. Prepare a Strategic Plan
Take a day or two away from the office with your department leaders to prepare a strategic plan. Determine where you are going and how you will get there. Creating a strategic plan can seem like a daunting or impossible task. I often hear, "we can't predict that far ahead ." The good news is you don't need to be accurate; you need to make critical decisions and outline the action items that will help you reach your goals. Don’t let the need for accurate predictions get in the way of action steps.
3. Forecast Your Cash Flow
Do a cash flow forecast for one quarter out. A cash-flow forecast is not as complicated as it sounds, and it's very beneficial. Like the strategic plan, the goal here is not to be perfectly accurate. Your goal should be to understand your assumptions and continually improve them by comparing them to actual results.
4. Seek Financing In Advance of When You Need It
Don't wait until you need money to try and get a loan or funding. Instead, plan well ahead of time. Forecast your needs and allow yourself to find the most cost-effective financing.
5. Always Think of the Exit
Public companies are always for sale. Having their owners and buyers scrutinizing them means they are incentivized to enhance the value of all areas of their company. No matter when you plan to exit, manage your business for maximum enterprise value. Don't focus solely on the bottom line.
About
Highpoint CFO is a CFO consulting firm based in Tampa, Florida, that serves clients throughout the US.
Scott Young is the President and Principal Consultant at Highpoint CFO. He is a CPA, Certified Merger & Acquisition Advisor (CM&AA), and Certified Value Growth Advisor (CVGA) with over 25 years of experience in finance and accounting at industry-leading companies.
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