Like many young women, I learned to cook watching my Mother. She was a great southern cook, her specialty being fried chicken. By the time I left home, I was pretty good too. My love of cooking was fostered in two ways. One, I loved to eat. And two, there was nothing better in my book than sharing a meal with family and friends. What I didn’t always enjoy so much was the preparation, especially if it involved knives. Chopping, slicing, dicing and mincing weren’t my fav things. These were the chores that had to be done to get to the good stuff.
With no other frame of reference, I set up my kitchen just like my Mother’s. Same pots and pans, same kinds of dishes and serving pieces, same knives.
For years, these tools served me well, or so I thought. Then I married my husband, Barry, and things got really interesting in my kitchen. You see, Barry had been in sales his entire professional life. And a large chunk of that time, he was a rep selling upscale kitchen gadgets to gourmet shops.
He had a gadget for everything. And knives, boy did he have knives! I had never seen so many knives. All shapes and sizes. As we cooked together, he was always correcting my use of knives. “Why are you using that knife?” or “That isn’t how you use that knife, it goes like this.” It wasn’t long before I realized in the world of knives, I knew very little. What was the difference in a chef knife, a paring knife and a slicing knife? How could they help me and how do I use them correctly?
Thankfully, Barry was a good teacher. Having the right knives and knowing how to use them properly made all the difference. I no longer dreaded chopping, slicing, dicing and mincing. I prepared meals faster and easier. And my meals improved! What a difference the right tools and the knowledge to use them makes!
Just like a good set of knives and the knowledge to use them, transforms cooking from a chore to a fun and enjoyable experience. A comprehensive financial management system, with the knowledge to use it, transforms a moderately successful business into a prosperous one.
In a prosperous business, not only is the business fulfilling its intention and meeting or exceeding its goals, the owner is fulfilling her or his personal intention and meeting their personal goals. So often the owner’s personal goals get lost in the 60+ hour work weeks of growing and building a thriving business.
And that is sad, because it’s not necessary. It really boils down to two very simple things:
- Having the right tools
- Knowing how to use them
What are the right tools?
A financial management system consists of three interrelated systems
- Monitoring, to keep your finger on the pulse of your business
- Analyzing, to discover the truth of what is helping or challenging your progress
- Predicting, to see around the bend and avoid unnecessary surprises
Monitoring systems include:
- Monthly financials
- Key Financial Indicator trends
- Departmental and Individual Scorecards
- Budget & Cost management
Analyzing systems include:
- Sales and Customer analysis
- Product and/or Service analysis
- Operations and Overhead analysis
Predicting systems include:
- Key Performance Indicators and trends
- Sales, margin and net income forecasting
- Departmental and Individual Scorecards
In business, a financial management system is your most valuable tool. It is also one of the most misunderstood and underutilized, for two reasons. First, entrepreneurs tend to excel at their craft, rather than finance. Just like me using my Mother’s knives, I didn’t know what I didn’t know. I needed someone who was an expert in knives to teach me.
Second, when an entrepreneur determines they are ready for help beyond a set of books, they turn to their CPA or tax advisor. In most cases, they can’t help, because it isn’t their expertise. Their job is to reduce your taxes and compile or review your external financial statements, not to build a financial management systems and teach you how to use it.
If 2017 is your year to prosper, start by taking the list above and inventory what systems you have and what systems are missing. Next, set aside an hour or two of quiet time and get out your journal. Write down what frustrates you about your finances. Where do you get surprised? What keeps you up at night? What decisions are you making blind, without good data? What is your return on your investment in your business and what would you like it to be?
Now that you have a good idea of the problems you are looking to solve and what systems you are missing, do your due diligence in finding a contractor that can deliver.
At Mackey Advisors, our intention is to create a prosperous world, one person and one business at a time. If we can help you on your prosperity journey, please reach out to us at 859-331-7755 or Lisa@MackeyAdvisors.com