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| Poor financial management, and how to overcome it |
Proper financial management is a bedrock for success and control in any business. But as start-ups and smaller businesses grow, their accounting systems and processes may not scale to meet their increased needs. When your internal processes don’t evolve alongside the rest of the business, mismanaged finance will almost certainly be just around the corner.
Small business owners rightly focus their efforts on growth – but sometimes miss the impact of poor management of finance issues. Why is this? More importantly, what is the impact? And how to fix the problem and ensure your financial management is a positive for your business?
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Why do businesses take their eye off the ball?
- Are you too busy?
- Are your resources constrained?
- Are you not using the right tools?
- Is there a lack of discipline in your processes?
- Is there a lack of know-how within the business?
It’s usually a combination of these factors. Setting up a finance function isn’t usually a “must do” – then when it does become an issue, the systems and people aren’t in place… and it can seem All Too Complicated and Maybe for Another Day… Don’t worry, it needn’t be – keep reading!
What effect can mismanaged finances have?
If your financial information is poor, you don’t have the real-time data you need to effectively manage your business and key drivers. Without these numbers at your fingertips you can’t make informed decisions; your forecasting and analysis are incomplete; and you may fail to act on potential opportunities.
You are also more likely to have cashflow problems when mismanaged finance rears its ugly head. Negative cashflow – rather than a lack of profitability – is one of the biggest causes for new and smaller businesses failing. Improving your overview of liquidity, and having the required cash in the business at the right time, doesn’t just help secure your long-term future – it avoids potential cashflow crunches, which can be a killer for any business.
If financial compliance rules aren’t followed and deadlines not met, this can mean substantial fines for the business (and possibly for you personally) as well as a huge amount of stress and worry piled onto your shoulders. Making sure your financial compliance boxes are ticked is a vital part of your director responsibilities.
Counterparts can also become aware of these issues: in an online age where information is so readily available to banks, investors and creditors, poor compliance results and fines can have a destructive effect on your credit rating and attractiveness to investors. And finally, mismanaged (or poorly understood) finances can lead to an inability to grab the opportunities out there in the market, or a lack of agility compared to your competitors.
Solve your mismanaged finance issues
Put a price on your time: It isn’t all on your shoulders – others can help! Look forwards not backwards: You can’t drive a car looking in the rear-view mirror. You need to understand where you are in real time, then forecast and plan for upcoming opportunities or issues. If needed, take stock and fix the mess: It has to be done eventually – don’t let it fester. Invest time now to save time later
How we can help
We can help you review and strengthen your internal processes and controls, ensuring those compliance deadlines are met, giving you peace of mind on financial management and to flag any issue before they get out of control. We’ll help you use cloud accounting and the great online platforms around that to streamline your systems, free up your time, and show you where your business is on a real-time basis. You’ll find these solutions are surprisingly inexpensive, and they don’t get in the way of you running your business: in fact just the opposite, they become invaluable tools. In short, we can provide the help and guidance needed to turn around those mismanaged finance problems.
Ivan Woods Managing Director, Head of Corporate Finance
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The Author: Ivan Woods
About:
I've worked internationally all my career: since 2000 based in Hong Kong, Dubai and now Singapore. I initially qualified as a Chartered Accountant with PWC in London. I’ve led teams for the World Bank and HSBC, as well as consulting for the C-suite and working as part of clients’ finance or transaction teams. I’ve helped to win and close deals from $1m VC fundraisings to $15bn infrastructure projects.
In infrastructure finance I’ve advised and lent to developers, investors and government across Asia, the Middle East and Europe. My experience spans origination, financial projections, structuring and negotiation, marketing and execution, and relationship management. Alongside such consulting roles, I work through Stepping Stone and the CFO Centre as “outsourced CFO” to larger SME clients, assisting on debt & equity funding, partnerships & JVs, and sourcing VC/PE investment
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