“Be thou diligent to know the state of thy flocks.” — Proverbs 27:23
In my decades of consulting with enterprises across the Caribbean, I have seen brilliant ideas fail — not because of a lack of market demand, but because of poor money management. Revenue is vanity, profit is sanity, but cash is reality.
Too many entrepreneurs make one critical mistake: They focus on their bank balance rather than their profitability. A healthy bank balance today may be hiding last month’s unpaid bills and next month’s financial crisis.
Money is the lifeblood of a business. Like blood, it must circulate freely, remain healthy and be monitored regularly. That is why financial management is not an annual exercise for your accountant — it is a daily discipline for you.
I teach this through the ManOBiz™ framework — Planning, Organizing, Staffing, Directing and Controlling your Finance System.
Planning Finance means budgeting. It involves forecasting your income, expenses and, most importantly, cash flow for the next 12 months. Without a budget, you are driving at night without headlights.
Organizing Finance means establishing sound financial systems. This includes a proper chart of accounts, separate business bank accounts, disciplined invoicing and effective cost controls. Never mix your personal finances with the business till.
Staffing Finance means engaging competent people — a bookkeeper, an accountant or a cashier — and, critically, separating financial duties. Ideally, the person who collects cash should not also be responsible for depositing it or reconciling bank accounts. In smaller businesses where staffing is limited, the owner must establish additional safeguards, including independent reviews of transactions and regular bank reconciliations.
Directing Finance demands daily discipline. Collect money owed to you promptly. Manage payments to suppliers strategically. Monitor your cash flow as if your life depends on it — because the life of your business does.
Controlling Finance means reviewing management accounts monthly, not annually. Compare actual performance with your budget, identify variances and take corrective action before small problems become major setbacks.
If you don’t manage money, money will manage you — and it is a hard taskmaster.
This week, set aside one hour to review your management accounts. Understand where your money is coming from, where it is going and what lies ahead.
Know the state of thy flocks.
(Dr. Basil Springer GCM is a corporate governance adviser. His email address is basilgf@marketplaceexcellence.com. His columns may be found at https://www.nothingbeatsbusiness.com.)