Edition 63 – Month End is a Daily Task
In Growth Edition 55 – “N is for Numbers” I talked about the increased advent of computerisation in the finance arm of family business over the past 20 years. However, what has not improved in that time is the ability (or willingness) of the in-house finance team to make use of the numbers to figure out how the business is travelling at a given point in time.
One of the key issues that I see in family businesses is that month end takes too long. It takes too long to close off the month, update the creditor details, measure the stock and determine what the month end result looks like.
So, here is a tip right off the bat:
Month End is a Daily Task
To that end, this is what your in-house finance team, whether it is Mum keeping the books, or you have employed a Financial Controller, should be doing daily:
- Reconciling the bank account – tick off the receipts that hit the bank account each day; check all amounts that exit the bank account; reconcile the bank daily.
- Check your credit card daily – check off what has been spent on the corporate credit card daily. The easiest way to check for credit card fraud is to check the card balance and transactions daily. Fraudsters often start with a small transaction first.
- Invoice daily – not weekly. Heaven forbid, not monthly, but daily. Raise invoices when a job is complete so that it is out the door and in the hands of your customer. That’s when your trading terms cut in.
- Input supplier invoices daily – if something looks awry, then deal with it when you receive the invoice, not when you come around to paying the bill. That way, you are giving your suppliers an immediate heads-up if something isn’t right.
- Check your Stock on Hand – your internal systems should be up to date so that you know on any given day how much stock you have on hand. If this is a cumbersome exercise, you need to resolve it. I have seen plenty of businesses where stock is the largest item on their balance sheet – and no one knows what it is truly worth.
- Identify your Work in Progress daily – you should know what work you have produced, but not yet invoiced, daily. Keep a record of it, daily.
- Checking your Actual vs. Budget result – if your sales are tracking behind budget on the 15th of the month, you can identify the cause and initiate rectification immediately. On the 29th of the month, it’s like leaving home for the airport 15 minutes before the flight is due to take off – but you live 60 minutes away. Too late!
If you treat month end as a daily task, the end of the month can take place right on month end. It is then a quick, seamless task and gives the business owner real time financial data when they need it to ask the questions about what is happening in their business – not when it is too late into the next month to right any wrongs that may be opening up in the business.
Finance is the discipline that most owners and managers of family business understand the least and, to be honest, are the least excited about. However, it is the discipline that will give you greatest control over your family business and enable you to fully appreciate how to fund the lifestyle and wealth creation that you truly desire from your family business.
This Week’s Tip
Daily attention to the finance aspect of your business will make it less laborious, more informative and give you greater control over your financial direction.