I first heard this saying from a family member many years ago, and it seemed trite to me, perhaps understandably! It’s one of these things that seem to be so obvious and just common sense – although as Voltaire once famously said, common sense isn’t really that common. So why bring it up again now?
Well, there’s a story attached. I was working with a client a few years ago that was going through severe cash flow difficulties; we finalised negotiations for working capital support late on the morning of December 24th and just managed to pay all the salaries before close of play on Christmas Eve. I don’t think the staff knew how near we were to ‘doing a City Link’ but it was a close-run thing.
So, what has this got to do with anything? It has everything to do with how I aim to serve my clients, so that they never, ever have to be in such a stressful situation. FD In A Box, and my role as a finance director, trainer and coach, is all about helping managers sleep better at night, being comfortable that they are on top of their finances and… knowing exactly how much money they have in the bank, Frank.
I was very struck by this article on empathy, , posted by http://www.aardvarkmarketingconsultants.co.uk a few weeks ago. Can empathy be taught? Well, my late coach Dan Patey once came out with the memorable phrase, you have to practise to be natural. I’ve thought about this a lot and whether you can ‘learn’ to have empathy. We can often learn by seeing the opposite in action, and I’ve experienced the opposite on a number of occasions as exhibited by somebody who was an ‘expert’ in finance! What is the worst horror story I can recall?
Before indicting any of my fellow-professionals, let me put my hand up first. Yes, I have been guilty in the past of putting up a slide of a mind-boggling spreadsheet, full of around 3 trillion numbers, and expecting my audience to follow the really important things I was about to tell them. The worst I have experienced has actually been during a financial awareness programme I was running for a public body. After I had been building rapport and creating empathy all morning, a member of the finance department appeared and switched everybody off with an endless procession of unintelligible slides full of unexplained jargon and meaningless figures. I felt a bit like the cavalry afterwards, riding back in to rescue the rest of the day.
My point here is that, with empathy, even business finances can be brought to life as long as people understand how they are relevant to their own lives. At the risk of blowing my own trumpet, this is what I am constantly striving to achieve in the FD In A Box webinars, guiding beleaguered business owners and managers in really getting the numbers and, I hope, being able to sleep better at night.
I first came across this phrase on a T Harv Eker training programme a number of years ago and I remember being very struck by it. Its relevance was brought home to me recently when I agreed to take on a new role as finance director for a small charity. My predecessor did an excellent job in managing very precise details of the charity’s finances – his energy went into managing the small stuff which was just what the company needed at that time. This observation helped me to realise that I am much more interested in the big picture, and that is where I will provide most value to the directors and talented staff. So it’s worth thinking about you and your approach – does your energy go into the small details or are you focused on the bigger picture? And what do you need if you want to manage your finances effectively?
The truth is, you probably need a bit of both. If you are a business owner, it’s imperative that you know where you’re going and why you’re doing what you do. If you lose sight of the big picture, the chances are your business will start to lose focus. On the other hand, you must look at the detail now and again, even if it’s just to be clear how much money you have in the bank. So the question is, how do you divide your time? Well, there are some simple guidelines you can follow to make maximum use of your time and energy:
- Understand the Pareto Principle and how it applies to your business – what are the 20% of transactions that create 80% of the results?
- Have a routine and discipline so that you programme the time when it suits you
- If you find it a chore (as I sometimes do!), just remember why you are in business in the first place. This alone can motivate you to pay attention to the small stuff when you need to
There is much more about this in the FD In A Box webinars…
I was very impressed when visiting a client last week, a charity that provides uplifting music to schools and churches, thereby supporting emotional, social and spiritual health and wellbeing in children through songs. Two of the managers of the charity, both gifted performers as well as being practical hands-on programme managers, wanted to learn more about their company finances. So I took them through the figures and here is what really impressed me.
When we came to looking at bank and cash balances, we started discussing why profit is usually different to cash in any organisation, and then I asked them how often they check their bank balance. ‘Oh, we check it every day using on-line banking’ was the answer I received. This was music to my ears (sorry about that) as this is exactly the message that I repeat constantly throughout the FD In A Box training webinars – know how much money you have in the bank!
So, if musicians can do it, what’s stopping you?
I have been intrigued by something I heard a few weeks ago, at a gathering of the Scottish Institute of Business Leaders (http://www.sibl.org.uk) – that it takes 10,000 hours of practice to achieve mastery in a field. The source of this is Malcolm Gladwell, in his book Outliers, as summarised in this excellent article from the Wisdom Group: http://www.wisdomgroup.com/blog/10000-hours-of-practice/ So this has got me thinking a lot about business owners and entrepreneurs, how they can acquire the necessary financial acumen and literacy, without devoting 10,000 hours that they probably don’t have! What can FD In A Box do to help here?
I’ve never yet seen the rulebook that says we have to be experts on everything! In yet another inspiring book, Now, Discover Your Strengths by Marcus Buckingham, we are encouraged to focus on what we’re good at, so why would an entrepreneur want to spend hours and hours learning about finance? What’s more important is to discover what you don’t know, and then optimise your time to learn it. If you don’t really understand your balance sheet and, therefore, how to maximise cash flow, you are definitely missing out. Make this your first New Year’s resolution…
To the west, next stop Canada; to the north, Iceland – yes, FD In A Box is operating this week from a remote spot on the Isle of Lewis, in one of the most northerly points of the British Isles. And I just love technology! Thanks to Wifi, my business just carries on as usual, indeed with even less interruption as I am working in such a peaceful place.
And being here has got me thinking about things, and about how universal law applies in so many ways. To come straight to the point in this context, cash flow and knowing how to influence it is the same for the farmers in Lewis, as it is for somebody running a busy corner shop in a city high street. Unless you know what you are doing and pay some meaningful attention to the figures, you are short-changing yourself (pun intended). A constant theme in the FD In A Box webinars is that of focusing on the important and not just the urgent. So, if knowing where the cash is coming from and where it’s going will help you sleep better at night, just make sure you’re giving this some attention. FD In A Box is here to serve you, to help give you this comfort.
Cash or profit, what’s more important? Well, it cuts both ways. I hope that most business owners now appreciate the importance of cash – most businesses go under because they run out of cash and this is a theme to which I constantly return in the FD In A Box webinars. However, I did work as Finance Director for a short time with a small IT company that went to the other extreme – cash was the only thing they looked at and they almost turned a blind eye to sales and profitability.
Happily, all ended well as they ended up being acquired by the customer that they almost hadn’t noticed they were making 90% of their sales too. It was a close shave though. Business can be complex, which is why just stepping back some times and seeing the bigger picture is so vital. Take all help you can get to do this.
Well, here I am again after some personal life changes of seismic proportions in the past 2 months – all of which make me all the more focused on doing what I can do to guide owners and managers of small businesses and social enterprises in really ‘getting’ their finances; I’ve seen for myself, again and again, just how people gain in confidence when they begin to understand and make use of financial information for better decisions and direction. So, what’s with the bird on the left? Well, I’ve come across this marvellous blog that really is music to my ears – http://www.cobwebinfo.com/the-problem-of-business-owners-financial-denial/ – and it reminded me of my very first blog on 10th September 2011, ‘Are you a financial ostrich?’
The blog from Cobweb says it all – ignore the finances at your peril! And let’s also look at the flip side, the pleasure as well as the pain. Instead of worrying about the bank overdraft, how would it feel to know that you are on top of things, to have a clear sense of direction and to see that the figures are working for you? Wouldn’t you sleep better at night? I know I do when I feel that I know what’s going on and that I am in control as far as that is possible. Perhaps that why I’m managing my current major life changes with, I am told, dignity and awareness…
As it’s a whole three months since my last post, I thought I would take the opportunity to reflect on and share what I have learnt so far in 2013. Most of my time has been spent in supporting business owners and social entrepreneurs, those brave souls who have created a vision and are now working towards the realisation of their goals. And I use that phrase deliberately, paraphrasing Earl Nightingale who famously defined success as “the progressive realisation of a worthy goal or ideal.” People generally ask for my services when they have a financial angle to consider, and I feel privileged to often have the opportunity to get right to the heart of their organisation – and their thoughts. So, what have I learnt? Continue reading
The main themes I’ve picked up from the last quarter are these:
- There is a growing awareness of the need for financial literacy
- Many managers are aware of a gap in their knowledge – and they have the courage to admit that they don’t know what they don’t know
- Without exception, all the people I have been working with are committed, dedicated and motivated, and have a very clear vision of what they want to achieve
- The challenge often lies in the short-term – today, this month, the next three months:
- How do I capture what is going on?
- How can I focus on the most important issues without drowning in my to-do list?
- How do I know that my pricing is right?
Yes, this last one caught me by surprise as well – I have seen a trend for business owners and social entrepreneurs to understand their costs in full, to ensure that their selling prices are both competitive and recovering their costs in full. This is great, all part of ensuring growth and sustainability.
Hats off to you all, I’m with you all the way, to support you however I can. That’s what FD In A Box is all about.
Though it pains me to disclose it, my football team recently set a new record with the longest sequence of professional matches without a win since the start of a season – ever. At an irrational and emotional level, I’m bothered by this – I have supported QPR since I was a boy and I identify with the team. At a cerebral level, I realise that (a) there is nothing I can about it and what does it really matter anyway?, and (b) I’m intrigued by what is going on behind closed doors that we don’t really get to know about. And this has got me thinking about the parallels with my own personal and business experiences, particularly when it comes to confidence and clarity about the way forward.
As I have stated so often, one of the biggest areas I have found where business managers and owners are unsure of themselves is understanding their finances – and this is the specific reason for FD In A Box to exist. If I can help at least one business owner or manager to sleep better at night, knowing that their finances are secure, then that is a result for me. I may not be able to do much about QPR – in Harry we trust – but I hope I can help other businesses avoid a similar losing record. Just don’t leave it too late…
Happy accounting – and Happy New Year!