Where no counsel is, the people fall: but in the multitude of counselors, there is safety. Proverbs 11:14
I have a lot of professional friends who are consultants in a variety of fields of discipline, as am I. So this blog post is not intended to slam any of them or any other consultant or advisor.
I’ve worked with hundreds of business owners over the years and I came to the realization over time that businesses try to talk to their owners!
A business will try to tell their owner if someone is stealing from them, or if their scrap or rework is too high if their marketing isn’t working, which employees are most valuable, which customers are making the most of their profits if their productivity is slipping, and on and on – – –
The question I then ask these business owners is: “Do you have the ‘ears’ to hear what your business has been trying to tell you for the last 20 years?”
It’s humorous when they non-verbally shake their head side-to-side, acknowledging that in fact, they can’t! Their business IS their VERY Best consultant, but they can’t understand what it is trying to tell them because they do not have it structured to provide its wisdom in an understandable “language.”
It’s like a radio station broadcasting EVERYTHING about the business 24/7, but the business owner doesn’t have their “receiver” set to the proper frequency!
You may have seen the NetSuite commercial where the founder says, “If you don’t know your numbers, you don’t know your business!” And he is absolutely right!
Most business owners understand the fundamentals of a P&L – income and expenses over time. They can look down the expense sheet, see “Telephone” “$350!” “Got it!”
But put a Balance Sheet in front of them and the fog starts rolling in! And most have never even heard of a Statement of Cash Flows!
But this “Three-legged Stool” is designed by CPAs to primarily do their taxes, and they are by design and utility, historical records – a ‘backward’ look at the business. In a sense, it is like driving down the road with the windshield of their truck painted black trying to steer by looking in the rearview mirror!
Business owners need FORWARD-looking management reports that can tell them on a daily, or even minute-to-minute, basis, where they are going.
One critical report is an Exception or Variance Report! But the business owner MUST have a BUDGET before they can have an “exception!”
I always ask the business owner if they have a budget, and if they say “No,” I assure them that they DO in fact have a budget, the only question is: “Who wrote it?” Because if the business OWNER did not write the budget, the BUSINESS is writing it for them! And it is an UNCONTROLLED Budget!! Not one that drives increased profitability!
The other essential forward-looking management report is a KPI or Flash Report or a Dashboard report that captures all the data most relevant to the performance of the business. These must be custom designed from an in-depth analysis of the business and its processes.
In closing, many small to mid-market, privately held companies need help with their basic accounting package to get their Chart of Accounts cleaned up and a budget added to their system. Another sign that this has to be a priority is if there are maverick spreadsheets or other rogue financial reports being utilized in the operation OUTSIDE of the main accounting system.
So, take heart, my fellow consultants!! Just get comfortable being the SECOND BEST consultant your client has AFTER you help them get their financial reporting house in order!!
Ralph C. Watson, Jr. 404.520.1030
Ralph.Watson@BeGreaterFaster.com
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