Why Measurement is Key to Fiscal Management
Originally published on September 1, 2015
Updated on August 15th, 2022
Newly formed companies require effective and proactive management in all areas including research and development, capital or funding, sales and marketing, to name a few. Generally resources are limited and the company founders end up wearing multiple hats to insure all business management needs are met. To divvy up the responsibilities, the common advice among experts is to identify your strengths and weaknesses and focus on what you’re good at while finding ways to shore up your weaknesses. One founder might excel at selling while another is good at product development.
What about fiscal management? Many new entrepreneurs struggle in this area, and when your team lacks this skill who takes on this role? At best one of the company founders will take it on or find a friend to help; at worst no one really takes it seriously and the company limps along with no processes for properly managing the financial activity of the new, growing business. If you’re struggling to find your footing within the realms of fiscal management, remember this one piece of important advice: you cannot manage what you do not measure. This is a fact. To effectively manage the financial activity in a business there must be:
1. Accurate data presented in a timely manner
2. Key drivers identified to analyze or interpret the data
3. Established procedures for using the information to manage your business and make important decisions like: How much should our product cost? How much should we reinvest in our business? Can we afford to hire another salesperson?
Look to others around you that possess a level of expertise in financial matters for advice. Let their experiences boost your learning curve and help your company avoid common mistakes or future disasters. The Pareto principle is found everywhere in life. Business is no different. According to Bloomberg, 80% of businesses fail within the first 18 months. Be one of the 20% that succeeds by effectively managing your business not only on the sales and marketing side, but through the accurate measurement and management of your financial results.
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