Introduction to the 7 Deadly Financial Diseases.
The proper design and effective management of an organization’s financial systems are essential to the success of every business. Unfortunately, many small business owners are unaware on how strategically important financial management is to their business performance. Additionally, too few understand that a business’s financial acumen can provide a competitive advantage.
Good financial management begins with a rock solid accounting/book-keeping system. It also requires internal knowledge on how to use the data for a business advantage. Good process design not only saves money and time, but also motivates and empowers employees to be more productive and engaged with the success of the business.
Do you know how healthy/effective your financial systems are? How do your systems compare to your competitors? Because just being good enough – is not good enough in today’s competitive environment.
Your financial systems are effectively your central nervous system. They assist in controlling the organization on an integrative level. It is a real time network of specialized elements that record, coordinate and send signals to your business on financial movement. It accomplishes this by extracting information from the environment by using collection points, and then sends signals that encode this information into the central financial system. Once captured, this information is reviewed and analyzed to determine an appropriate response.
Some organizations have developed a highly sensitive financial nervous system that enables them to have improved customer inter-actions and rapid coordination both internally and externally.
Do your financial systems provide you with the information you need to properly manage your business and serve your customers? Relevant financial information lights your path, provides insight, and organizational vision that communicates if you are going in the right direction.
If not, then you may want to consider having a financial checkup. Periodic financial reviews are a cost effective business strategy. They can uncover issues before they become major problems. Usually those close to the operation are too busy with their daily tasks to evaluate the entire processing cycle.
How can you tell if your financial processes are healthy? One simple way is to ask yourself, “Are you spending an increasing amount of time on financial related issues?” If so, it may be wise to have a financial checkup, because this is a clue that one or more preventable financial diseases are in play in your organization. And if they are ignored and allowed to take root, they will lower your profits, and create a host of unwelcome internal issues. Financial diseases simply do not self-correct – intervention is required.
It is common for us financial professionals to group like type financial processes into categories. This facilitates the examination of these processes from a holistic point of view. As with all processes, over time – they become outdated or out of alignment with the current needs of the business. This creates inefficiencies and other unacceptable outcomes.
The medical profession has a time proven effective practice in diagnosing and treating diseases. It is something that the business world can draw upon, because there are many parallels between common diseases and a business. For example, the phrase “there is a cancer on the organization” is a very powerful description of a business problem that most people can relate to.
So I have taken this a few steps further and believe that a fresh way to examine the effectiveness/health of an organizations financial processes are to use analogies for communicating both problems and solutions. One particular approach that I have found particularly effective in explaining these problems to non-financial readers’ is to couple a financial process with a common medical disease.
Below are seven core financial processes that I have joined together with a corresponding disease that can attack the well-being of any business’s financial system.
- Cash Hemorrhage
- Financial Ebola
- Costing Dyslexia
- Control Hepatitis
- Budgeting Retinal Detachment
- Economic Scurvy
- Growth Influenza
Unfortunately, most small to mid-sized companies do not have the luxury of having an in-house financial Doctor that can conduct a financial checkup? Nor do they have the necessary in-house expertise to treat as well as diagnose these all too common deadly financial diseases. Just accepting the status quo as, ‘that’s the way we do things around here’ is a missed business opportunity.
It is typically easier for a seasoned outsider to recognize flaws and implement practical solutions. This is because they are not wed to the current processes and practices and can thus provide a more objective assessment. A cost effective solution is to seek out professional help, rather than adopting a go it alone self-treatment type of approach. Similar to a physical exam – conducting periodic business checkups (no matter what size your organization is) is an important element in maintaining a healthy, productive, and successful business.