Does regular monitoring of financial health matter?
By Jon Orr, Managing Director, Optimas Financial & Accounting Solutions
It’s true what they say: An ounce of prevention is worth a pound of cure.
If someone chooses to live an unhealthy lifestyle – eating poorly and not exercising – he or she may appear outwardly to be healthy. But eventually, that person’s lifestyle will catch up with them, surprising them one day with high blood pressure or even a heart attack. And solving these health problems will be expensive and time consuming, possibly requiring prescriptions, surgery, and major lifestyle changes. But had that person been constantly monitoring his or her health, that person would be far less likely to experience a major health scare.
Your business is the same way. Your financial information is like the vital signs of your business. If you’re tracking the right performance indicators, you won’t have to worry about unexpected cash flow problems or cost problems or sales problems, because you won’t be caught unaware. You’ll have taken steps to avoid those problems in the first place.
Take, for example, the construction market in 2007. It would have been easy for a building contractor to think that life was nothing but roses. He may have been content simply raking in the money, completely unprepared for what might happen if the sales suddenly screeched to a halt. And when it did, he would have been in big trouble.
However, if a building contractor were strategic in his thinking and had been regularly reviewing the right financial information, he would not have been caught by surprise when the market turned south. A proactive business owner would have been consistently looking at his data to see how he could run his business as efficiently as possible– in good times as well as bad. He would have understood where he was most flexible in his costs, so that he could make cuts in the right places and negotiate contracts strategically, to put his business in a more competitive position. As a result, he would have built a strong business that was better able to withstand whatever market challenges might arise.
Paying attention to financial data helps the business owner proactively identify and address potential challenges. If you’re caught unaware, the solutions can be very expensive. And when you’re focusing all of your time on solving an issue, you’re distracted from the real issue – paying attention to your business. Regular financial monitoring is simply smart business.
© Optimas Financial & Accounting Solutions
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