“Financial management” — is it a simple statement or an oxymoron? Unfortunately for many it is an oxymoron; finances and financial results are not managed, they simply are the “by-products” of our labors.

 

I am eminently qualified to write about this subject; years ago I squeaked by bankruptcy in my first business. I was “salvaged” by an acquisition, not my insightful financial management. This occurred with a high volume of work in progress and comfortable backlog while I worked diligently “in” my business rather than working “on” my business. My accounts receivable were impressive, my cash flow terrible. I simply failed to manage the financial side of the business. 

 

Why did I do that; I didn’t know any better. Plus, the financial side of the business not only didn’t interest me, but as an engineer I had zero formal training in financial management and had little appreciation of how important it was to my success. I had an accountant; that was her business — or so I told myself.  My resulting “MBA under fire” was not only painful it came at an extremely high cost.

 

The reality is that a healthy company’s finances must be managed. They must be managed to achieve specific goals and budget objectives; not simply left to become the “by-product” of our efforts. Before we can manage to financial goals and objectives, we need to set them based on sound practice not best wishes.

 

In the past nine months I have written three articles on financial issues and I encourage you to go back and reread them. They focused specifically on capital investments and cash flow management. But those are only aspects of financial management and we need to look at the broader issues.

 

There are three primary areas of focus in financial management:

To do these effectively a financial manager must:

If you are comfortable in that roll, all the more power to you; if not you can become comfortable. Help is not hard to find, in fact you can send yourself to “school” at no cost. Here (http://www.exinfm.com/training/) is one that offers a tremendous amount of online training--free. I have mentioned in the past taking advantage of SCORE, again this is an excellent source of knowledge. The Small Business Administration is another source for support and information. Don’t forget your accountant and banker; make them your partners.

 

I can assure you, ignoring financial issues has a certain outcome; it isn’t pleasant. You will never manage what you don’t understand and don’t look at. If you do not know (and understand) your financial position on any given day, you are not managing it.

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