One of the most common, yet frequently overlooked, reasons that many small to medium enterprises (SMEs) find themselves failing is unawareness. I know, I hear how crazy it may sound - a business owner not knowing their company finances and operations sounds absurd (and it is), but sadly it's a fairly common reality - hence the first major issue we typically see is unawareness. So, how does this happen? And is there anything you can do to guarantee you'll never find yourself in the same unaware position?
For SMEs, cash flow issues, market shifts, and rising costs can very quickly affect business stability. Financial awareness will provide the agility to adapt to these changes as fast as you find out about them - whether it's reallocating budgets, revisiting cost structures, or pivoting a strategy entirely.
Growth often requires investment - this could be in new technology, staff, or marketing. Without accurate and timely financial insights, these decisions will become guesses rather than calculated risks. Owners should be able to confidently allocate resources knowing that they're backed up by clear, to-date data.
Financial transparency is not just for internal stability; it also helps build trust with lenders, investors, and even employees. A business that is financially aware can secure better financing options, attract investors, and establish a reputation of reliability - an asset for any company to have, but especially so for SMEs in competitive markets.
It's a good and natural thing to trust key employees in your business, like general managers or certain members of your finance team. They are seasoned professionals and you do need to trust them to handle specific aspects of your business - that's why you hired them. You want to feel comfortable stepping back from operations, and be in a position where you can rely on your staff to "worry about everything". This process of delegation is critical for business growth, but also frequently the point at which unawareness begins to take root.
Consider this scenario, a general manager is brought on (expecting a high salary) with full authority over the company's day-to-day operations. You, as the business owner, feel comfortable and begin to step back assuming you have the right person steering the ship. However, without setting a reliable structure to monitor their performance and the key areas of your business health (think cash flow, profitability, and operational costs), how long will it take before you notice it's all spun out of control?
If you're noticing expenses climbing, but are unable to pinpoint the return, it's a sign you may be slipping into unawareness. It may be time to reassess your current reporting practices and communication with your finance team.
Cash flow problems that seem constant are often a warning sign of deeper, unnoticed financial mismanagement. It may be time to reassess your current reporting practices and communications with your finance team.
When decisions are postponed because you don't have the numbers at hand, it's time to streamline your reporting process. Getting quick access to financial insights should always be a priority in your business.
When businesses rely solely on year-end financial statements, they are guaranteed to miss-out on key information throughout the year. Monthly (some might even argue weekly) or at worse quarterly reviews are needed for spotting trends, catching errors and putting out sparks before they burn down everything you've built.
Assigning operational or finance tasks without regular oversight will often lead to unintentional blind spots. A structured approach where clear expectations, goals, and performance metrics are established is essential.
A finance team isn't just there to exist and balance books - they're a valuable source of insights. Regular, open communication allows for more accurate projections and a greater understanding of operational performance.
Let's go through a typical example of how unawareness can lead to disastrous consequences:
The end result? A staggering $750,000 loss in under two years - all because they lacked timely and actionable financial insights. This is the high cost of unawareness: prolonged periods without clear visibility into the business's financial health, leading to decisions based on outdated and inaccurate assumptions.
It's worth making note that the team members involved in these situations may be highly skilled and dedicated to their roles. But does the general manager or finance team have the same vested interest in scrutinising every (and I mean every) financial or operational detail as you, the business owner? Their focus is typically on compliance and transactional tasks - keeping the books, processing payroll, or submitting taxes - rather than actively analysing and critiquing the business's performance. No one will ever care as much as you do about your business, which means, you must have the appropriate structures in place to maintain awareness, regardless of who is on your team.
To avoid falling into a state of unawareness, take proactive steps to ensure you stay informed and on-top of of decision-making.
Unawareness in business doesn't come from neglect, but from misplaced confidence and assurances that 'things are running the way they should be'. It's vital to establish a framework that will keep you actively involved in and informed about your business - your financial oversight will become a tool for growth, not just compliance exercises.
Through consistent engagement with your financial data, you will do more than just avoid pitfalls - you will gain the clarity and control required to make informed business decisions to propel you and your business forward. Ask yourself, do you have the structures in place to stay aware of your business's true financial health? If not, take action.
One of the key functions of a Virtual CFO is to provide you with regular, thorough financial updates - no more waiting until the end of the year to know where you stand. Here at CFO Dynamics, our monthly reporting offers:
This regular pulse check removes the guesswork, providing the information you need to make quick, confident and impact decisions in your business.
In many cases, unawareness stems from a lack of clear roles and accountability within the finance team or broader management. A Virtual CFO will help create a structured environment where:
You want a structure that keeps everyone accountable, so you can have the confidence and assurances in your team's output and insights.
A Virtual CFO doesn't help you see what is happening with your business - they help you to understand why it's happening and how you can improve. The strategic insight goes beyond the numbers, offering advice on:
With a Virtual CFO's expertise, your financial strategies not only become clearer, but also aligned with your business goals.
While your finance team might focus their efforts on transactions and compliance, a Virtual CFO will act as your strategic and financial advocate. They have an impartial, bird's-eye view of your business and can:
This external perspective can be invaluable, helping you see potential blind spots and grounding your decision-making in reality.
When you're stuck in a cycle of unawareness, it's easy to be reactive, constantly responding to problems rather than trying to anticipate them. By hiring CFO Dynamics as your Virtual CFO, we can help you can take a proactive stance by establishing systems, providing real-time visibility, and focusing on long-term growth. With this support, you avoid costly surprises, gain control over the direction of your business, and double-down in confidence about where that direction is headed.
The bottom line? A Virtual CFO isn't just about managing your numbers - it's about empowering you with the insight, structure, and confidence required to lead an effective business. Instead of unawareness and uncertainty, you will gain clarity and control - a powerful combo that supports stability and growth.
So, ask yourself: do you have the right financial oversight to stay on top of your business's performance? If not, getting CFO Dynamics as your Virtual CFO may be the key to transforming how you manage, plan and succeed.
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