Basic Finance
Small private companies (annual sales revenues less than $ 10 million) often lack strong financial management, leading to very poor decisions. This can cripple company growth and erode what the business is worth. On the other hand, the largest and best managed companies put a great deal of emphasis on finance. This is because finance represents a critical process for ensuring growth and providing direction on how to allocate resources.Larger private companies (annual sales of over $ 10 million) have similar challenges, such as making the right long-term investments for growth and measuring the drivers behind financial performance. Regardless of company size, there are a wide range of practices that make finance value added to the company:
Cash Flow
Working Capital
Investments
Small companies often fail to properly manage the cash flow of the business, forcing the company to borrow and put the company's future at risk. It is important to put strong collection and turnover practices in place so that cash flow circulates, covering the current operations of the company.
Working capital is the life blood of your company. Yet many companies lack the full range of practices for managing each component (such as inventory). It is important to aggressively manage every component, ensuring that the business can grow without taking unnecessary risk.
Businesses need to make investments that generate returns higher than the Cost of Capital. Otherwise, you destroy value within the company without realizing it. This is a very common problem for many private companies. This is one of the key practices that I will implement for your company.
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