The importance of using financial information as a navigator to business success
Geoff Freestone Oxford Innovation business coach explains the importance of using financial information as a navigator to business success.
When I was starting out on my career I often wondered how businesses ran and how complicated it must be to make money and grow a successful organisation. Surely it must be more difficult than selling something for one price, buying (or making it) for less and then using the balance to pay bills and anything else I might need to live on?
I have since learnt that successful startups and growth businesses start by detailing their business, its core activities & key performance drivers into a financial model. Financial management information can then become an active navigation tool for the business; used on a daily, weekly and monthly basis to track progress. This allows forward growth planning based on financial reality instead of hope. Whether we like it or not EVERYTHING we do in a business has a financial cause and effect. Hiding behind your accountant and expecting him or her to make sense of your figures once a year is no longer good enough.
Anybody starting out in business or wanting to grow one has to be prepared to understand the relationship between profit and loss, net income and balance sheet value, as well as weekly updates of cash flow needs. These financial calculations and reports have often been seen as only “professionals” territory but they are not as complicated as you might first believe.
So, don’t be frightened of financial information – good financial management is critical to success and it’s a lot simpler to use if adopted from Day 1. Once you understand how to interpret this information, business decisions, both short and long term, can be made more objectively and the risks taken more measured.