Do Business Well

1. Keep your employees informed

Don’t keep everyone totally in the dark — people like to know how the company is doing. If they know enough of the facts they will respond to the challenge of the company’s policies.

2. Publicise financial targets

Whatever your business you will have to work within certain financial constraints and towards some financial targets. Let the relevant employees down the line understand clearly what part they have to play in containing the business within these constraints.

3. Have a clear, straightforward financial control system

Some control and information systems can be quite baffling to managers. Just because they are brilliant engineers it doesn’t mean they understand figures. The financial information must be presented in a manner that can be understood by the non-accountant. Too many facts can confuse. So ensure that the system can be genuinely understood by those concerned. Keep it fairly straightforward and avoid technical terminology. Remember that the control system is intended to assist in the efficient running of the business. It should not be so complicated that it creates misunderstanding and mistrust.

4. Keep up-to-date with the reporting systems

An extended time lag between the event and the reporting of the event so severely dilutes the impact of the report that it can have almost no effect. Reporting systems are a vital means of cost control and performance appraisal, and must be up-to-date.

5. Advance the report so as to anticipate adverse variances

If all your control procedures are based on the recording of history it is rather like shutting the stable door after the horse has bolted. Where possible, devise a method of forecasting variances and taking evasive action in good time. Try analysing purchase orders, as opposed to purchase invoices, over their cost centres and you will anticipate excess costs. Also calculate the excess cost of an overtime programme before it is carried out rather than after the wages have been paid. By doing this on an ad hoc basis you may assist managers in avoiding the creation of adverse variances.

6. Improve the level of financial awareness

As a business needs to respond to a continually changing series of events, it is vital for management to be aware of the financial implications. The overall target may remain unaltered, but tactics change by the minute. The wisest course of action is close liaison between finance staff and management if profit-responsible managers are to have the advice they need.

7. Organise an effective management audit

While you’re busy directing and controlling operations, an objective appraisal by an independent management auditor can help to crystallise objectives for improvement. Don’t let him be simply a ‘judge’: he should be used positively, not merely as a critical observer.

8. Make the most effective use of your external auditors

Usually very experienced and astute, the auditor can advise on financial matters in a constructive and dispassionate way. Use your auditors well and take advantage of their knowledge and experience.

9. Insist that the finance department is the pulse of the business

A genuinely lively accounting staff that gets involved with events as and when they happen rather than a few reporting weeks later can act as a creative influence in minute-by minute decision making. Trained accountants who get immersed in the running of the business can turn out to be the managers of the future.

10. Issue daily key statistics to managers

Get your accounts department to circulate key statistics each day. Such statistics could include values of orders received, production and sales, cash balances, debtors and creditors etc. These would not be in the form of management accounts but should be viewed as an early warning system. Consider what are the main financial goals and criteria and monitor your achievement daily.

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