If you're a business owner, I bet you’ve been told you should be forecasting. This traditional advice suggests that there is a specific model to follow or a manual to use. However, as you and I both know, the reality is that when life gets in the way, your forecasting...
Understanding Financial Accountability
“I’m not here to give you the good news.”
I say that phrase to clients much more often than you might think. Because I ultimately want to celebrate their business’s success with them, I’m there to tell them the actual state of their company’s finances and guide them toward better financial accountability.
We work on financial accountability often with our clients at Fritz Financial Solutions, and we do it well. But I won’t sugar coat it; this type of accountability is hard for business leaders. It’s usually filled with uncomfortable conversations and difficult decisions.
Whether you are a big business, with many people looking over financial documents, or the only one keeping track of your business’s bank account, being accountable in business – and our lives – allows us to be more successful.
Steps to financial accountability
The first step in achieving financial accountability is to generate and review your financial reports on a regular basis. You need transparency to understand what is happening with your money.
I like to start by analyzing the company’s balance sheets and profit and loss statements, whether profitable or not. At Fritz Financial Solutions, we first focus on the cash on hand a business has to work with and what debts they are responsible for.
Then, we look at expenditures and the performance of the business operations. That’s when we get to the good stuff – what is driving the numbers we see in the reports?
Only after analyzing the expenditures can we start to explore the return on investments and get to the process’s most important – and uncomfortable – stage. This is when we discuss what needs to change.
On the bright side – and there can be some bright sides in this process – if the company is profitable, something is working. We continuously explore how the business can lean into that.
But quickly, we turn to the heart of why we are doing this exercise; what are other opportunities to increase profit?
Financial accountability to increase profits
At this stage, our team might ask what the business needs to do to increase sales. For example, we want to know what marketing is being done and what we need to do to increase sales. What is the pricing strategy? And, of course, we assess how the business can minimize expenses.
Payroll is usually the highest expense for a company, often representing 30 – 60% of all expenditures. And employees who are not meeting your expectations can be more expensive than you think. Businesses are not just losing money on lower productivity but also in management costs of training and coaching, and additional costs to pick up that slack. Not to mention the risks businesses may take on due to employee resentment, sabotage, careless injuries, workers comp and more. These can be the most challenging decisions of all, but the best ones you can make for the health of your business and the culture of your workforce.
We can also dig into the details of each expense category. Software is a great example. We want to look at what software businesses are paying for and help them evaluate if it is giving them the expected return on investment or if there may be a better product in the market to turn to. For example, we have found software subscriptions that no one at the company was using, but it continued to be an unnecessary expense on their books each month.
Adjusting behaviors for financial accountability
Is the company spending over 5% of its earnings on meals? That’s not only bad for the bottom line; it’s also a red flag for the IRS. Issues like these require an adjustment in behavior by the business owner, employees, or both.
Behavior adjustments for better accountability can be tricky to handle – it’s something that we struggle with in both personal and business aspects of life. But, in any scenario, it’s about the choices we make to get to the results we want to see.
If you see your business is losing money, you can act the same and continue to watch your graphs trend down, or you can admit you need to make some changes to be more financially secure. In your personal life, if your partner tells you that something you are doing is making things harder for the relationship, you can either say, “that’s just who I am,” and watch the relationship suffer, or listen and make the changes needed to support a successful relationship.
I can’t make the decisions for you. As the business owner, it’s your responsibility to take action, but I can give you data-supported guidance on those decisions to help you succeed and get the results you want.
Give yourself some grace
I know this may all sound a bit intense – so there is one last thing that is important to remind ourselves. We are only human, and it is not easy to be accountable. As a leader, it’s another skill in your toolbox that you need to develop. So start with baby steps: be willing to look at the numbers and be open about making adjustments.
You work so hard. Don’t let the business suffer because of your lack of financial accountability. Take responsibility for the results you are seeing to get the results you want. Contact Fritz Financial Solutions today to take that first step to achieving more financial accountability through transparency.
What solution can Fritz Financial find for you?
Schedule a meeting with Daliah Fritz