When you gain an understanding of the cost to keep your company up and running at a deeper level, you’ll be able to plan ahead for unexpected events that come your way and keep a better eye on the cash flowing in and out of your business. .
If you create a clear financial target every quarter — year after year — remain transparent, and provide financial updates to your team and clients, you’ll be on a path to success in no time.
Below, leaders from the Fast Company Executive Board offer their best practices to manage your company’s money properly and make sure that your financial partnership is solid and has your best interests at heart.
1. LEARN THE LANGUAGE OF YOUR FINANCIAL PARTNER.
The best way to keep an eye on the cash flow and your financial partner’s intent is to work through the jargon and work with them to understand the details. Start learning this from day one. Establish that faith in your partner by showing them your willingness to put in the work so they can do the same for you. This helps align your best interests. – Candice Georgiadis, Digital Agency, Inc.
2. MONITOR YOUR FINANCIAL ACTIVITIES CLOSELY.
Set your financial goals and track all of the money that is coming in and going out. Not watching your funds is the fastest way to end up with zero funds. – Eric Brown, Imperio Consulting
3. COME UP WITH A FLEXIBLE BUDGET PLAN.
Creating tight financial management with flex budgets based on annual or quarterly cost center and revenue expectations with ratios. Revenue may come up short or exceed your expectations. Flex budgets will unlock or constrain your spending levels based on forecasts or on a lagging basis. These will allow you to project cash flow. Always present medium, high, and low target scenarios to partners. – Ed Beltran, Fierce, Inc.
4. MAINTAIN FINANCIAL TRANSPARENCY.
When going over your cash flow, do it with your partner and your company accountant present. There’s nothing like having a third-party professional who can state the facts without bias to help you and your partner see what’s really happening with your company’s finances. A CA or accountant can be in-house or someone you contract work to. They’ll be the best people to help you read your cash flow. – Syed Balkhi, WPBeginner
5. COMMUNICATE FINANCIAL UPDATES.
Set expectations on spending limits and hold bi-weekly updates on the financials. Like anything in business, communication is the underpinning of a trusted and well-executed plan. – Michelle Hayward, Bluedog
6. REVIEW YOUR PARTNERSHIP AGREEMENT.
My partners and I reviewed our partnership agreement every year and renegotiated ownership and revenue share based on performance and contribution. It kept us focused on our combined goals and outcomes which were focused on preparing the business for sale and maximum profitability. – Mike Koenigs, The Superpower Accelerator
7. IDENTIFY CLEAR FINANCIAL TARGETS.
Start each year and quarter with clear financial targets. Review progress with your partner and the financial team at least monthly, tracking progress to plan. Course correct as you go. Double down where it makes sense and constrain costs where a lower investment is prudent and not harmful to the business. –Matt Domo, FifthVantage
8. UNDERSTAND YOUR COSTS ON AN INTIMATE LEVEL.
When you understand your costs, especially your critical costs (those that can’t be cut in the event of an emergency), you will be able to stress-test your business for nearly any straining exogenous event that may occur. Regularly implement exercises to reevaluate what areas are the most critical so you can control costs without controlling them. – Tyrone Foster, InvestNet, LLC