If you are an entrepreneur, have you ever found yourself just “Staying Afloat”? It isn’t fun worrying about how to pay your bills week to week. These are the days of a lot of hope and hard work, with less money to show for it than you would make slinging burgers at McDonalds.
For those that persevere, there is a new stage, “Comfortable”. You are sleeping better at night, you’ve got a good team helping you and a steady stream of business. Cash flow is better and you are beginning to make some decent money. But you are one blink away from going back to “Staying Afloat”. One significant customer, one key employee or one key vendor can knock a hole in your ship that creates an all hands on deck emergency.
Many business owners find being “Comfortable” works for them and choose to make their business work at this level.
For a variety of reasons, some of us, in order to feel prosperous, want to “Break Out” and reach the “High Potential, High Performer” business stage. Passion, ambition or wealth may be your driver, but regardless of why, making this leap is a big challenge.
The level of complexity, and skill needed in management, finance, marketing and more must accelerate dramatically to support our upward movement.
One of the most overlooked areas that has to grow is finance and accounting. Often seen as an overhead item, business owners often focus on minimizing the expense of finance and accounting rather than making it a way to add value to the business. Entrepreneurs often lack of an understanding of the need nor the know-how to acquire the talent to implement the kind of sophisticated systems required for a business to reach its high potential.
In any Fortune 500 company there are layers of financial talent. Bookkeepers, budget analysts, financial analysts, controllers, accounting managers, cash flow experts, performance measurement specialists, and more, directed and managed by the CFO to interface with all the areas and functions of the company in accordance with the company’s strategic and financial plan.
Just as a Conductor directs and manages a symphony orchestra to play beautiful music, we need CFO-level talent to direct and manage the complex set of financial skills needed for all facets of our business to play the same tune. Without this expertise, it is like trying to play Bach with the High School pep band. You are going to get something, but it will be more like noise than music.
So what does a professional symphony orchestra level finance department look like for a small to mid-size company and how can they afford it?
Let’s consider first what it must include. Instead of one system, as we tend to think of it, an accounting department. The system to get you to “High Performance High Potential” is actually THREE integrated systems:
- An expanded and more metric-centric accounting system
- An accountability system
- A business structure system
Let’s look at all three components.
The accounting system needed to prosper at the “High Potential, High Performer” level includes:
- A Measurement System (traditionally called reporting or accounting systems)
- Fully integrated bookkeeping to manage all the day to day activities
- Controllership talent to manage a consistent and timely month end close process
- Month end financial statements
- Trending company-wide Key Financial Indicators
- Departmental and individual Key Financial Indicators
- Budget reporting
- Current Forecast
- The capacity to do deep dive analysis as needed
- An Accountability System
- Vision, mission and the owner’s intention for the business
- Communication systems to get feedback on goal development & to communicate results appropriately
- Owner commitment and accountability to the chosen intention and goals
- Cascading Metrics ™
- Company, department and individual Key Performance Indicators
- Reporting rhythms and transparency
- A Business Structure System
- An understanding and periodic revisit of the company’s value proposition
- An understanding, monitoring and periodic revisit of key leverage points
- A business financial plan grounded in the value proposition and leverage points
How do you afford it?
Rather than build your own talent team, which is pricey and not the core competency of your business, you build an internal team that handles your day to day accounting and supplement that team with outsourced talent.
The trickiest question of all is…. how do you know when you have found it? Many CPA firms say they are Business Advisors and there are outsourced CFO’s as well. But many of these resources solve or troubleshoot problems rather than developing systems that help you make better decisions.
To find that rare provider who has the talent to build the systems you need to reach “High Performing High Potential”, ask potential vendors these four questions:
- What is your process for helping us predict the future?
- How does your work bring accountability for business goals and objectives into each department and individual in the company?
- What is your process for helping us clarify our business intention and how is that intention used to influence the goals and decisions we make?
- How does your process help us, as owners, work less by working smarter while at the same time increasing our bottom line?
While there are other questions you will want to address, failure to answer these four tells you the vendor you are considering doesn’t really have a system to help you build the accounting and finance department you need to support your growth.
Lastly, at the end of the day, it is your business and it holds the key to your personal prosperity. Change is a choice. You can choose to stay comfortable and at some point you will your quality of life and amount of income will max out. There is nothing wrong with that choice! The simple act of being clear on your choice can bring you peace and joy.
The alternative path is to break out and reach your “High Potential, High Performance” Prosperity level. The growth of your quality of life and income will be greater, but so will your risk. This is a great choice too. The simple act of choosing and making a commitment to hold yourself accountable to that choice is your first step in reaching your “High Potential, High Performance” goals.
This is your one life. What do you choose?
If you choose to leap to “High Potential, High Performance” and need a finance and accounting team to support you in that journey, we at Mackey Advisors welcome the opportunity to answer the four questions above and any others you have. We are The Prosperity People and our passion is to expand your prosperity.