The world in great mayhem due to COVID-19 pandemic it is a fair assumption that most businesses will struggle; some will fail. The differentiating factor between surviving or thriving will be the financial clarity that the business has.
Businesses are scrambling from declining sales and stalled supply chains while trying to ensure that their employees are healthy – having a robust familiarity with your business financials is more critical than ever. Financial clarity will ensure proper cash flow management which ultimately leads to your long term sustainability and survival of this pandemic.
So what is financial clarity?
Financial clarity gives a clear view of the cash available to the business along with an expected outcome of future business. Without a clear understanding of where the business is right now, the business will have to only guess where it is going. Financial clarity enables the business to make decisions easily while ensuring that there is peace of mind and a level of reduced stress.
Financial clarity enables the business to make informed choices about allocating human resources, whether to continue or discontinue certain activities of the business, expansion of business, etc.
An important way to determine financial clarity is by establishing accurate financial statements. The most common financial statements are – the balance sheet, the income statement, and the cash-flow statement. From the accurate financial statements, you can build weekly and biweekly metrics that provide you the real-time information needed to make decisions.
Why is financial clarity important?
I know, not everyone wants to deal with financial statements. Most want to only understand the income statement which provides an insight into how are things going right now. The trick is the balance sheet is even more important as it contains the history of your organization’s performance. Think about it this way, your balance sheet is the soil that a plant lives in. It is where the roots are. And your income statement is the plant itself. It is what you see every day. But if you do not maintain the soil of your business you could ultimately end up killing your plant. Believe me, I have done that with both my business and my house plants.
Accurate financial statements open a window for making well-informed decisions and therefore strategically predict future performance and growth of the company. Companies stand to make better decisions when they have accurate financial statements because then they can plan their business goals, resources to achieve those goals, and how to use those resources most efficiently to ensure success.
In conclusion, financial clarity is the cornerstone of modern business. It is a source of untapped power and potential that acts as the foundation that ensures that a business is prepared for a best-case scenario, a worst-case scenario, and everything in-between.
We can support you through financial management coaching
How confident are you in your financial position? Not sure, give us a call…(703) 544-7047
Blackburn Capital Advisors has a proven financial management process that enables business owners to have confidence in their financial position. From the position of strength, we develop and track real-time metrics to support business decision making. Over time, this leads to strong business forecasting along with proper cash management