Growth
Growth is almost always associated with success, but beware! The seeds of failure are often sown in periods of success when business owners/managers fail to plant the firm structural foundations and financial controls needed to accelerate growth whilst remaining in control of the business and its finances.
Growth from a rapid increase in sales can lead to ‘over-trading’ where the business becomes overwhelmed with fire-fighting day-to-day, quality problems, order delays, customer dissatisfaction staff stress and low morale, and declining profits, which can haemorrhage cashflow and lead to a financial crisis.
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what should i be doing?
It is essential to establish strong financial disciplines especially when businesses are growing to ensure they maintain liquidity to continue funding that growth.
A key requirement is accurate and timely management information (real-time, daily, weekly, monthly) that is easy to understand. This is best presented in a dashboard format with key metrics (KPIs) that at a glance allow you to track performance and enable a strategic look forward to planning the business.
For example, some key financial indicators are – cash and cashflow forecast, profit margins, sales orders, profitability by customer, sales pipeline, debtors collection days, creditor payment days, working capital, and trends over time.
What should i look out for?
- Are you growing rapidly and ‘overtrading’ with problems fulfilling orders and huge strain on cashflow?
- Is your industry or market undergoing major changes?
- Is the business going through major changes e.g. rapid growth or decline?
- Are the management team feeling really stretched and is financial pressure increasing?
- Are you missing key skills at Board level such as Finance Director, Business Development Director, IT Director, Workforce Director?
- Are there one or two major customers the business is dependent on?
If any of the above ring true then get in touch to find out how we may be able to help you stay in control of both you business and your finances.
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