1st January 2022
Whether you manage a small or large organization real leadership matters if you are going to remain financially viable. As the leader in your organization you are responsible for its success. Of course you may say you only have control over a certain aspect of your business. This is true, however you should find out even more of what is occurring in your business and determine the best way to influence and lead to achieve success.
Do you take the time to understand the financial results you are getting from your business? Are you satisfied with these results? If you are satisfied can you do more? If you are not satisfied what can you do to ensure you change the trajectory? My experience shows me that I get better results when I set goals and objectives. Performance measures are then established to monitor how well the objectives are being met. If you find that you are not on track to meet the objectives you must take actions including making appropriate adjustments to achieve the desired objectives. In order to guide your organization through financial success, you should be willing to challenge and encourage fiscal responsibility within your organization.
As a business owner you need to have an established budget for the year. The budget is an estimate and should reflect the sources of revenue and the expenses within the organization. As with any other objective, it is important to monitor your budget on a weekly and monthly basis. Your budget should consider any seasonality or peak sales or expenditure periods. When you have established your annual targets you should evaluate on a monthly basis if you believe you could remain on target. In simple terms if you want to remain profitable your sources of income must exceed your expenses and you need to keep this balance as best as achievable. When you decide to make a new expenditure for items such as marketing and sales expenses, ensure that you have a specific strategy for generating additional revenue. Always get a good understanding on what type of return (profit) you expect to get on your investments.
If you are a new business owner it is important for you to become familiar with the income statement and have a vivid picture of what is on that statement and how the initiatives your organization do on a day-to-day basis impact that income statement. Similarly, you should also get a basic understanding of your assets, liabilities and funding sources of your business. As a reminder the assets are those items the business own for the basic purpose of generating revenues. Keep this point in mind that you want to operate effectively and you do not want to have idle assets. You should be using those assets to generate revenues. The liabilities are items you owe. When you borrow funds, these funds should be used to support your business and help achieve your business objectives. The assets, liabilities and owners equity resides on your balance sheet. It is prudent for owners and managers of the business to understand and use the organization’s financial statements to achieve their business success.
As a leader, you can do more for your customers and employees when you remain profitable. You may maintain your budget information on a well designed spreadsheet such as Microsoft Excel or select other budgeting software. Regardless of your selection of software, It is a very good idea to to have the basic functions of breaking down the data so you could understand what is contributing most to your revenue and expense. Leaders, it is well worth it.
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© Delroy V. Morgan – Zing4Success.com Zing4Success Strategic Management and Planning. You may not copy and or publish this article without the author’s explicit and written permission.
About the Author:
Delroy Morgan is Founder and President of Zing4Success Strategic Management & Planning. Delroy has expertise in strategic planning, business planning, asset management and financial assessment. He has over 30 years of combined business and engineering operations experience.
Delroy has been instrumental in helping businesses streamline operations. He led corporate business transformation, managed the development and execution of corporate annual business plans and strategies for energy generation and distribution utilities and provides training to small businesses. He has facilitated CEOs, VPs and business units’ employees through the corporate business planning process. He works with employees across the company to link actions aimed at improving overall customer/client satisfaction and business owners’ value.
He is experienced at evaluating a firm’s performance, and establishing performance measures that drive superior business results. His expertise is rooted in having an understanding of leadership, strategic planning, financial statements, contractual agreements, engineering, and project management. He teaches Finance and Accounting as an Adjunct Professor. Delroy is a recipient of the Judith S. Zak Adjunct Teaching Excellence Award from Medaille College.
Delroy received an MBA from Rochester Institute of Technology and a BS-Mechanical Engineering from City College of the City University of New York.
“Business leaders motivate others to maximize their performance by implementing sound business practices, controlling costs and streamlining business operations to deliver value for customers and stakeholders” –Delroy Morgan