GROWTH AND PROFITABILITYOptimizing the Finance Function for Small and Emerging Businesses phần 4 pot

4

MULTILEVEL APPROACH

INITIATING THE FINANCE STRATEGY

Where to Look First

The health and well-being of the organization is the number-one priority of the

small and emerging business owner. Leadership must focus on both the operational

and the nonoperational (back-office) aspects of the business to keep the organiza￾tion healthy. One of the greatest challenges for any business leader is balancing

time and resources between front-line and back-office issues. Typically, the small

and emerging business owner is, because of the life cycle of the enterprise, more

oriented toward operations. Identifying and dealing with nonoperational issues,

KEY TAKEAWAYS

■ Understanding the need to rely on more than instincts to make decisions.

■ Understanding the evolving nature of finance strategies.

■ Realizing that most issues affecting finance are not mutually exclusive.

■ Knowing where to begin the strategizing effort.

■ Understanding the need to gather all finance needs and identify all issues be￾fore strategizing.

■ Understanding the need to prioritize all needs and issues before strategizing.

■ Understanding the multilevel model for strategizing.

■ Understanding the need to analyze the business life cycle.

■ Understanding the need to evaluate financial data customers.

■ Understanding the need to analyze the finance organization, information sys￾tems, and finance/business processes.

■ Appreciating the role of data flow processes.

■ Distinguishing between upper-tier considerations and lower-tier considera￾tions of the multilevel model.

■ Recognizing the need to manage cash flow.

■ Knowing the importance of setting balance sheet policies.

■ Knowing the importance of setting profit and loss (P&L) policies.

specifically the finance function, can be a particular problem in this phase of busi￾ness development.

Many small and emerging business owners feel that it takes a certain level of

experience to address the finance function properly. These owners can be proac￾tive in maintaining a healthy finance area without having to be finance/accounting

experts. The best place to start is with a positive attitude and two key realizations.

First and foremost, they must appreciate the finance function—knowing what it is

and how it will help the business. Second, they must recognize that they exist

within a continuum of finance knowledge. No business owner knows everything

there is to know about finance. The same goes for the other extreme—no business

owner is totally devoid of knowledge. The fact that a viable business has been

started in the first place implies that there is fiscal value in the enterprise (i.e., the

enterprise yields benefits that exceed the amount of resources used). The business

owner has already made decisions with a fiscal grounding—usually attributed to

instinct. The danger is, however, taking comfort in the belief that the small amount

of knowledge accumulated in the finance area is sufficient to run the business in￾definitely. Business owners can never have enough knowledge to deal with every

challenge the enterprise will face. They must recognize this fact as they mature and

delegate duties and responsibilities.

The need to strategize becomes logical as business owners become aware of

this continuum of knowledge. Recognizing and recording business needs and ac￾knowledging the organization’s capacity to meet those needs will help business

owners approach the finance area, either for the first time or to improve it.

There is no one way to develop a finance strategy. Fraught with subjectivity,

this task has numerous dependencies and variables—elements that change and

evolve as the business grows. A further complication lies in the different strategies

needed for small and emerging, midsize, and large businesses. The differences lie

in the demographics of management and the life cycle (level of maturity) of the

business:

■ Small and emerging businesses. In such organizations, business owners typ￾ically wear many hats—operations, finance, human resources, and so on.

Staff is typically small, and business owners must rely on their own instincts

to make operational and nonoperational decisions. The lack of finance ex￾pertise may put the organization at risk, as sound decision making requires

multidimensional thinking. When the business is in its infant stage, it often

lacks overall infrastructure, particularly in the finance area (concrete com￾ponents). The need for soft components of the finance function is less a pri￾ority as the urgency to grow and yield cash is great.

■ Midsize businesses. More stable than their smaller or younger brethren,

these businesses typically have dedicated finance staff focusing exclusively

on finance issues. The finance area usually is good at accumulating histori￾68 MULTILEVEL APPROACH