Business people often have a blind spot when examining their own companies. Because of the emotional and personal involvement with the organization problems are often ignored, deliberately downplayed, or even refused entry into the office or boardroom door. A business person ignores the warning signs of impending business danger at her peril.
It's a good policy to seek the facts, the hard data, and the truth about what is happening in your business. Ignoring or even refusing to examine the numbers and the overall health of your firm can lead directly to liquidation. We don't want that!
When establishing a business, it's essential to keep track of the basics of accounting. Your business needs a balance sheet listing the company assets minus the liabilities, both short and long term, providing a snapshot of the owner's equity. That's how much is yours after all the debts are paid.
When preparing the balance sheet, be honest and realistic in your assessment of value. It's of little benefit to anyone to claim your old battered equipment is worth millions of dollars. Self delusion doesn't make for a successful business.
An accurate profit and loss income statement is also essential. It's nice to know if the business is actually making money; or at least not drowning in red ink. Knowing where a business is standing financially is a fundamental building block for a successful company.
Prepare a cash flow analysis to ensure that you have some idea when your business revnues will arrive in your company accounts. It's also important to know what times of year major expenses will be incurred. This is especially vital for seasonal industries. Become very aware of the monthly peaks and valleys in your business income. Better preparation can then be made, to avoid being short of cash, to pay your bills in a timely manner.
If there are impending cash flow difficulties, the prudent manager must be informed of the financial situation in a timely manner. Steps can then be made to right the ship, or at least prevent a possibly business crippling disaster. Stopping a loss or potential loss early can not only save valuable cash reserves, but maybe even the company itself.
Employee problems often arise in a business. Stopping personnel issues in their tracks, and ensuring that only the best people are hired and retained is extremely important. A business is only as good as its people. Hire the best, and reward them well for their efforts. By the way, there are other staff motivators besides money.
Let your staff be open and honest with ideas and problems. Ask for their input on potential solutions. Employees are much more likely to work hard to achieve a goal or complete a project they initiated themselves. Keep everyone aware that open dialogue does not allow for complaint sessions, but rather are early warning systems and idea generators. Think of the positives, and not the negatives, while accepting and acting upon the bad news as well as the glad tidings.
Keep up to date on news in your industry. It affects your business directly, whether you like it or not. Be well informed about the state of the local, regional, national, and global economies now and in the future. Crises can be avoided, and emerging opportunities can be seized ahead of the competition.
Don't suppress your business problems. Embrace them. In the clothing of a a major problem or crisis, a powerful business opportunity can be the result. It may even present a new market, product, or cost cutting solution for the business.
Openess and honesty, whether with the staff, your business associates, your customers, and with yourself pays.
As they say, honesty is indeed the best policy.
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