There are many trip wires along the path to growth; so many parts of your business are changing at once – new staff, more customers, new processes, and management and leadership issues to name just a few.
So it’s critically important that you have someone competent running your finances. Growth does funny things to your cashflow and many a company has failed with a full order book and profits, but simply run out of cash. I can’t emphasise enough that good financial skills are an essential part of the mix if you want to grow and survive in the long term.
The reality in most businesses is that the finance staff are unqualified and lacking the experience they need to keep your business safe.
I learnt this very painful lesson early in my career. At 20 I was appointed finance manager for a fast-growing company; we grew from £0.5m to £10m in three years, and by then I was managing a team of eight finance staff. I was keen, ambitious, worked extremely hard, BUT I didn’t understand finance apart from how to operate Sage and run a cashflow forecast. Debits and credits were an utter mystery to me.
The business owner didn’t know what I needed to know, OR what he needed to know about finance, and so we muddled along in a haze of financial ignorance until the day the business went bust.
I believe this was their most critical mistake, and it’s one I see repeated in almost every business I work with.
Finance skills are too often, mistakenly, seen as a low-level, admin task. I have lost count of how many businesses get the admin person or PA to “do” the accounts.
So why are finance skills so poor in small companies?
1) The business owner doesn’t know what they need in a book-keeper.
2) They don’t know how to test if their book keeper knows what they’re doing.
3) Generally the book-keeper is left to “get on with it” and no one has any way to tell if they’re doing a good job.
4) Because bookkeeping is often seen as an admin task, companies won’t pay to get someone good.