Can you be objective about this

04th September 2020

You’re driving down the road, when suddenly a car coming from the opposite direction runs a red light.

You’d probably blame the other driver for being reckless…

And be angry at them for being selfish and putting everyone else in danger, just to shave a couple of seconds off their journey time.

Actually, you’d be furious, wouldn’t you?

Now let’s reverse that scenario…

…And say you’re the driver who ran that red light.

Chances are, you’d feel terrible for making an honest mistake…

Telling yourself you were just day dreaming for a moment or there was some special reason why you couldn’t see the traffic light…

In any case, no one was hurt – so all’s well that ends well, right!?

So it’s the same action – but you might see it very differently, depending on which part you play in the story.

Steven Pinker, the cognitive psychologist, calls this the “moralisation gap”.

He means that unconsciously, we tend to overestimate our own good intentions – and under-estimate the good intentions of others.

In other words, it’s just really hard to be really objective…

I’m sure that you’ll agree this is true in our personal lives.

Most people aren’t truly objective about their own strengths and weaknesses… Or their actions… Because our egos get in the way. And our emotions, too.

And it’s the same with business.

If you own a business, it’s your baby.

And it can be really difficult to admit when things aren’t going to plan… To be honest about why that’s happening… Or to look ahead to the future and evaluate your prospects with a really clear head…

…Because even though we say that “business is business”, the truth is that there are lots of emotions involved.

It can be difficult to admit to ourselves that things might not go our way…

Or that our businesses are in a difficult place…

Or that people we like – members of staff or clients – might let us down.

Why am I telling you all this?

Well, over the past few weeks we’ve been talking about the importance of developing a cash forecast for your business, and then using that to manage your cash.

It’s absolutely crucial to make sure that you don’t run out of money… And that you have the cash to pay for your growth, when you need it.

Now, developing cash flow forecasts and managing your cash is quite an intensive job.

Still, some companies prefer to do this in-house – or for the company owner to do this, all by his- or her-self.

I don’t think that’s a great idea…

Because if there’s one thing I hope I conveyed over the past few weeks, it’s just how subjective your cash flow forecast is.

There’s no “correct” answer to how much money is going to be in your bank account in 3 months’ time (until the day arrives, anyway)…

There’s just a set of assumptions!

For example, your cash flow forecast may look completely different, depending on how strong you believe demand is going to be in November…

Or whether you trust certain customers to pay on time…

Or whether your outgoings are going to stabilise or not.

These involve judgements about your business, your team, your customers and suppliers, and the external environment…

And like we said, it’s really hard to be objective about all these things.

So whilst technically, of course a business owner can create their own cash flow forecast…

I’ve seen time and time again, how beneficial it is to have a trusted, more objective advisor to hand, to challenge their thinking and their assumptions…

…Just like it’s helpful to have an outsider by your side, when you develop your budgets and do any kind of financial planning for the future.

That’s one of the roles we play for our clients, when we manage their finances.

Not only do we do the technical work, drawing up your cash flow forecasts and monitoring and tweaking them every single day – so you don’t have to worry about any of that…

…But we’re also the voice that says, “Stop… have you thought about such-and-such?”

Or, “Wait… Is that really realistic? Or likely?”

The result is more accurate and cash flow forecasts, which we can use together to help your business grow successfully…

…Instead of pie-in-the-sky figures which sometimes bear little relation to reality - and are no help to you at all.

If that’s the kind of close guidance and help you’d like managing your finances, call us today on 01279 647 447, or email me right now.

Warmly,

Garry

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