It’s ironic but true: despite all our resolutions, the new year starts quite badly for most of us. 1 January usually begins with us sleeping off the long night before. Some of us wake up groggy and hung over, and even those who didn’t drink anything are almost guaranteed to wake up late and lethargic. There are a few, though, who take their new year’s vows for change seriously. At the new year’s party they make sure not to drink too much and get a reasonably early night. On the first morning of the new year, this rare species of individual can be seen out on an early morning run. They’ve managed to achieve what many of us only dream of – they’ve actually started their new year the way they want to continue with it. They’re off to a strong start – and their chances for achieving their goals for the year are higher than those who plan to start the following Monday. It’s an exhilarating achievement, but it takes sacrifice and effort. And that’s why there are so few people who can boast such a strong start to the year. The rest of us would prefer to party, sleep in and start some time later.
Similarly, our businesses can get off to a great start, by putting sound financial management practices in place. Just like that new year’s early morning run, this requires focus, sacrifice and discipline. It involves making decisions in advance and may involve foregoing some proverbial “partying”. But the payoff of healthy financial management is a stronger company that is much more likely to hit its goals in the new year.
Here are a few pointers to ensuring that your financial management starts off on the right foot:
Take your first run around an old block
In other words, start off your year by looking over last year’s performance. Good financial management involves reviewing where you went right and where you went wrong. This is a tough process when done properly, involving brutal honesty and introspection. The outcome is that you start out your new year with an idea of what bad habits you need to get rid of and which ones you need to embrace.
Stretch before you run
In order to avoid injury, runners warm up their limbs before they exercise. From a financial management perspective, this means budgeting effectively before you spend. The budget allocation process ensures that you spend within defined parameters and don’t “injure” the business by overspending on a whim.
Build up to long distance
Runners work towards goals, and don’t expect to achieve them the first month they start training. Good financial management involves projecting, planning and saving towards big expense items. In our current economic climate, it’s more prudent to wait a little longer to outlay capital and incur less debt in the process. Running a marathon when you’re not ready could have a long-term detrimental effect on your lungs and limbs; borrowing lots of cash for a sudden large expense could have long term detrimental effects on your cash flow.
Track your progress
The most successful runners track their time and distance every time they run. If they hit a plateau or start to regress, they determine what’s affecting their progress. Good financial management also involves ongoing tracking and measurement. It means constant “checking in” against forecasts. If budgets are being exceeded, a good financial manager immediately begins to investigate why, rather than being hit with a nasty surprise at the end of the quarter.
Starting your year out with healthy financial management involves reviewing the past year honestly, budgeting accurately, working up towards large expenses and measuring outputs. If your business could benefit from starting off on good financial footing this year, contact The Finance Team. Our finance executives can assist you on an interim or part-time basis according to your needs.