Is your financial information helping you to align key stakeholders?

Communication and alignment are key elements which contribute to the success of small business or the lack of it can lead to failure. I always remember the activity you do in primary school where you have 5 people in a line, the first has a message and by the time the message is passed through each person in the line to the last member, the message the last member gets is total different to the original message.

In business this is no different. When you sit in a meeting, and everyone is in “agreement”, quite often what each member of the meeting has agreed to is something different. You walk out of the meeting thinking you are all aligned, but miscommunication and lack of clarity in goal definition means they are not. This can have a devastating impact on the business if it is not addressed.

Having a good set of financials for the business built up from the key performance indicators (KPIs) is a key communication tool which often Small – Medium size businesses lack. We are not talking about a set of accounts that comes out of an entry level accounting package like Xero or MYOB. While good historical information is an important baseline, it does not, by itself, allow the business to evaluate the financial impacts of its strategic options or provide a basis to measure the success or otherwise of the strategic options that have been taken. What is needed are forward looking financials, looking forward at least 12 months, so the likely financial impact of decisions being considered today can be foreseen and if you proceed, provide a basis for the strategic decision to be measured and monitored.

By having a good set of financial forecasts that business owners, their investors and staff buy into, alignment with investors and key staff members can be achieved. The business goals and actions can be communicated clearly through measurable KPIs. How do your financials stack up ?