NUMBERS ARE AN OBJECTIVE STARTING POINT.
It is not unusual for managers to take decisions based on their intuition which is an approach that may work most of the time, specially for professionals with long experience, but sometimes these decisions that “work” are not in line with the company’s best interests. From time to time it is necessary to make a pause, look at the big picture and rethink all the processes that are in place just because these have always been done in the same way.
Today’s financial reality of all companies and businesses is determined by many variables, some quantitative and some qualitative. Both types of variables must be considered and taken into account when deciding what’s the best approach the management team can take. Is it worth now to sacrifice cash flow by increasing sales extending the receivables collection period? The answer depends on interest rates, investment plans of the company as well as on many other aspects that may or may not be reflected in the company’s financial statements. Applying a course of action isn’t always as easy as it seems.
NUMBERS TELL THE TRUTH ONLY IF ASKED THE RIGHT QUESTIONS.
How much do you think your management team knows about the key metrics of financial management? You may be surprised by the answer and even when there is technical knowledge, the use and interpretation of those metrics may be far away from the optimum. When everything works we don’t always stop to think about how things can be improved. Sometimes the appropriate performance of some business units may be hiding underlying inefficiencies that are damaging your net profit. It is critical to be sure that managers are well educated in finance theory as well as in the application of that technical knowledge.
Numbers are a mean and not and end. What does ROI actually mean? True, it measures the return you are getting on your investment. But is that all? For sure it is not. The cold figure may be telling you more than you think. To find out it is necessary to ask the right questions, it is necessary to take the time to see if figures make sense despite how accurate calculations are. Real world filters must be applied when looking at the numbers.
Interpretation of reality varies from one individual to another. To address this issue every company must have in place a unique criterion and a unified way of analysing the context. The big picture must be made available to everyone taking decisions within the company. The competition, the economy, the company’s and the clients’ needs must be incorporated into one single analysis in a continuous process that allows the management team to not lose track on what is needed to succeed.
PEOPLE NEED TO KNOW WHY THEY ARE DOING WHAT THEY DO.
Your company wants to hire talent and talent only needs the appropriate tools and information to develop. If managers not only know what needs to be done but also why it needs to be done then better practical solutions will arise naturally. When management knows the underlying reality underneath the course of action the company has taken, they are better prepared to improvise when, as very often happen, things do not evolve as expected. Healthy organisations need free thinking aligned with the company interests.
THE RIGHT SERVICE PROVIDERS CAN SAVE YOU A LOT OF MONEY.
Money needs banks and in the current interconnected business environment companies suffer from hidden friction costs on their transactions. Improving the management of your treasury or the banking network your company uses to send and receive payments may have a significant impact on your company’s performance. At Kramer we analyse your current banking services providers and the comparative quality of their commercial offer. If necessary we search for new providers better adjusted to your company’s operative and financial needs.
WHY DOES MY COMPANY NEED FINANCIAL INTELLIGENCE ADVICE IF I ALREADY HAVE A CFO?.
Your CFO may be too busy on the day-to-day operations of the company or she may not have the necessary time to spread among all the company’s managers the best practices that will allow the company to do more without more resources.
WHY IS IT IMPORTANT FOR MY SUPPLY MANAGER TO KNOW THE INNER MECHANICS OF THE COMPANY’S FINANCIALS? .
Accounting sales may not reflect actual sales. Depending on how reposition of supplies is managed at your company your profit could be unnecessarily being diminished.
WHY IS IMPORTANT FOR THE COMPANY’S PRODUCT DEVELOPMENT MANAGER TO GET INSIGHT INTO THE COMPANY’S FINANCIALS?.
Easy. Do you have a low-margin cash-cow product that is still being sold just because is a short term source of cash helping long term projects? If interest rates are low or access to capital is at hand then you are sacrificing profit.
WILL FINANCIAL INTELLIGENCE HELP MY COMPANY TO IMPROVE PERFORMANCE?.
For sure but maybe more important is that Financial Intelligence can be the tool that will allow your business to be alive five years from now. We tend to think that companies are eternal but truth is that they are not. Companies do bear the risk of disappear without notice and most of the time this risk materialises because of easy to prevent failures. A company in good financial shape can cope with the most adverse economic problems but no company can survive a financial distress situation.