During Liz Truss’s premiership, the economy felt like it was on the brink of collapse.
The Bank of England had to intervene to stabilise market turbulence, buying up a whopping £65 billion worth of gilts. The pound plunged to frightening lows. Meanwhile, interest rates soared.
Then, Rishi Sunak became prime minister. And within hours, the markets calmed.
What caused the turnaround?
It wasn’t anything Rishi did – because the markets improved before he’d had a chance to lift a finger for the economy.
It was about something more fundamental: Who Rishi is.
Because of his background as a successful Investment Banker and then Chancellor, the markets had confidence that Rishi was qualified to run the economy. Market nerves settled once they knew there was someone at the helm with the right credentials who knew what he was doing.
There’s a lesson here for business owners.
You too have stakeholders who can influence the future of your company – such as your banker, customers and suppliers.
And they, too, need confidence that you know what you’re doing financially, particularly when the economy seems shaky.
If they ever come to doubt your financial skills, you may suddenly find it difficult to access bank loans and support when you most need them.
You might find suppliers reluctant to work with you. And clients could abandon you, too.
So how can you be that Rishi-like leader, whom your stakeholders trust implicitly on financial matters?
- Don’t bluff: Be in control of your company’s finances.
If you’re not quite sure how profitable you are…
Or you have no idea what your cashflow forecast looks like…
Or you were recently surprised by a VAT bill you had no idea was coming…
Or it’s been more than a month since you’ve seen up-to-date accounts…
Or you have no budget for the next year…
…These are all warning signs that your financial management is lacking.
Stakeholders would be right to question your financial credentials and authority.
If that’s the case, you need to become genuinely knowledgeable about your company’s financial situation quickly. Rishi’s authority didn’t come ex nihilo; it came because he had a real track record.
So get more involved with your company’s finances. Put in place all the basic systems necessary to give you authoritative, timely financial information. Then use that information to form robust plans for the next few months, including a crisis management plan should your financial situation deteriorate.
Know your stuff! - Communicate your financial authority to outside parties. It’s not enough to have your company’s financial situation in hand. Your stakeholders need to be aware that’s the case.
So, for example, be proactive with your banker. Show them your management accounts, so they can see that you’re making decisions based on reliable numbers, not gut feeling. Share your financial forecasts so they are familiar with your plans.
Then, if you ever do experience a crisis, you won’t have to waste time establishing your authority. They’ll already have proof you’re a good bet and will be more inclined to help.
It’s harder to proactively show your financial authority to suppliers and clients. But you can be sure that they’ll lose confidence quickly if they sense your company’s finances are not well run – for example if you’re regularly late on payments or refunds.
That’s why having robust financial systems and processes is key. When stakeholders can see that your financial affairs run smoothly, they’ll give you the benefit of the doubt.
Now let me ask you – hand on heart…
If your company was in financial trouble, would your stakeholders be confident that you could handle it?
Would they doubt you, like the markets doubted Liz Truss?
Or would your presence at the top be enough to reassure them that your company can pull through – like Rishi Sunak?
If you’ve answered “Liz Truss,” we can help.
When you work with us, we make sure that your finances are managed to world-class standard.
We take responsibility for your numbers, handling your transactions, pulling together your accounts and filing your taxes. And we institute tried-and-tested financial process and controls, so that everything runs on time, with minimum surprises and no ‘fire-fighting’.
Lastly, we help you interpret your financial data so you understand your exact financial position and can make the best financial decisions for your future.
It will be obvious to anyone who comes into contact with you, that your company’s finances are in the best possible hands.
And here’s a secret. You’ll feel more in control of your company’s finances, too…
…Because it won’t be an illusion. With our support you really will have financial authority and understanding, even if you feel completely in the dark financially today.
To find out more about how we can help, get in touch with me today. Simply ‘reply’ to this blog or call us on 01279 647 447 for a no-obligation chat.
Warmly,
Garry
