How to get through the NEXT disaster15th April 2020
What’s the best way to get people to wear a seat-belt in the car?
You’d think it was pretty straightforward. Tell people that if they don’t and the car crashes, their risk of dying shoots up – that’s a pretty compelling case, isn’t it?
But research shows that for many people, another type of messaging works much better – for example, telling them that they will gain points on their licence if they are caught unbuckled.
It’s a lot less dramatic. A small message, by comparison.
But apparently, that’s exactly what makes it more convincing, because on any given day, people are a lot more likely to believe that they might gain points on their licence than die in a car crash.
You see, it can be difficult to imagine that the worst really can happen…
…In business as well as in life.
That’s why so many companies operate in ways that leave them open to disaster.
They don’t have enough cash reserves to get them through a serious emergency.
They’ve never put any thought into what they’ll do if the market suddenly changes dramatically, if their largest client went bust or if a key supplier was suddenly unable to operate.
They’ve never considered how they’ll manage, if their in-house accountant is suddenly unavailable for a month (and, it turns out, she is the only one authorised to access their bank account…. Or his accounting system turns out to be completely incomprehensible to anyone else).
They never seriously imagined that any of this could happen to them. It all seems too outlandish and unlikely.
But of course it can…
…as we’re seeing right now with the Coronavirus crisis, and before that, with the financial crash of 2008, with the September 11 attacks in 2001, and many other industry-specific events. “Worst-case scenarios” are not even that rare!
And those businesses that never bothered preparing for the worst are left seriously exposed, and perhaps even in danger of collapse.
Now, don’t get me wrong. No business can be fully ready for a disaster on the level of this lockdown. The circumstances are truly unprecedented.
But the companies that will survive this most easily all have one thing in common.
They had good financial management going into this crisis.
Managing your cash in a professional manner is easily the most important thing you can do to prepare your company to face a serious challenge in the future.
Think about it.
Who is going to do better right now – the companies who had a Finance Director monitor their finances closely for the last few years, ensuring that they were in the very best possible financial position at all times….
…Or companies where financial decisions were always made haphazardly, without proper data, without proper budgets or forecasts? Or perhaps where there was no structured financial management at all?
I know who I’d have my money on.
Companies with good financial management have also spent time thinking through worst-case scenarios, and put in place measures to mitigate those risks. That’s part of the job of the Finance Director.
Even if the plans they conceived weren’t quite right or adequate, they still have a head-start over competitors who had done no forward-thinking or risk-management at all.
And they’ll also have proper financial systems and processes in place, so that they can continue managing their cash smoothly even if members of the team fall ill or become unavailable, and even if the office is closed.
That can easily be the difference between your company continuing to serve clients, pay staff and process invoices, and struggling for weeks on end to continue operating!
The bottom line: Professional, high-level financial management gives you a competitive advantage.
It’s true when times are good, and your financial management helps you grow much faster. All those measures I’ve just mentioned are the key to scaling easily!
And it’s true when times are bad, and it helps you survive.
For many companies, the Coronavirus crisis is going to be a necessary wake-up call – the event which makes you fully internalise that yes, the worst-case scenario can happen to you…
…And that if you are going to make it through the other end, you have to dramatically change the way you run your company, including its finances.
We’re here to help.
If you’d like to discuss what needs to be done to bring your financial management up to world-class standards, get in touch with me today.
I’m looking forward to hearing from you -
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