The Economics of Good Financial Advice
By Mark Wardell @MarkWardell | May 1, 2013
No matter how large or small your business, you alone are responsible for its success. That’s why, as a business owner, it’s as important to be aware of what you don’t know as it is to know what you excel at.
This is especially true when it comes to your finances. Over the years, I've seen countless businesses derailed because the owner failed to surround him or herself with the financial expertise he or she needed.
The problem? Most businesses start out small, and consequently their need for financial support and advice is similarly small.
Common scenario: A small business hires the owner's brother's cousin's niece to do their accounting because she recently became an accountant, she seems nice and the price is right. However, as a business grows, so does its need for sophisticated advice.
At some point along this path, the inevitable question needs to be asked. "Am I getting the optimal financial advice and support?" What follows are five points to consider when evaluating the financial needs of your business.
Are you clear on your financial needs... or not?
Often, when we hear clients complain about their accountants and advisors, we discover that they actually have perfectly qualified professionals around them. They have just never asked them the right question. So before you rush out and hire a new accountant, sit down with your current provider and open up about the kind of help you think you need. If your relationship has primarily been about tax issues, for example, your accountant may be under the impression that you aren't looking for anything further from them. This type of conversation can be a real eye-opener for everyone.
Get the best financial people you can afford.
Good financial people contribute to your income through cost savings, investments, and growth planning. They offer the kinds of efficiencies that can give your business a competitive advantage. A good accountant, for example, will save you considerably more than she charges you. If you've come to the conclusion that you need stronger help, start by asking for a referral from a company you know has exemplary financial systems- they likely have great advisors.
Remain aware of your financial systems at all times.
No matter how adverse you may be to financial management, as the owner, you need to clearly understand and remain aware of your financial control systems at all times. These are the systems that control the flow of money both into and out of your business. A lack of control here means you'll eventually put the financial health of your business at risk.
For example, a business owner I know nearly went under due to poor cash management. His situation could easily have been avoided had his company put solid receivable and collection systems in place.
Explore additional expertise.
Accounting is not the same thing as financial management. Whereas accounting focuses primarily on producing and analyzing your financial position, financial management focuses primarily on planning and decision-making. If you find yourself in need of additional support, the costs of getting it are likely worth the benefits.
Never stop analyzing your financial position.
Your statements and systems contain a lot of important information that can help you make better decisions in your business. So regularly sit down with your accountant or financial advisors to review and discuss your data. You'll be surprised at how valuable this exercise can be to shaping other areas of your company.