Finance in Your Business
Corporate Culture and Your Finances
We discussed the concept of Corporate Culture in Management. Studies show that companies with a strong Corporate Culture perform better than those without. What that means is your company's bottom line will be affected positively by strengthening your Corporate Culture. In fact, companies with strong Corporate Culture have an easier time attracting investment money. Building your Corporate Culture comes with a cost, and must be weighed against the perceived benefits.
As we move through Finance, we will be focusing on the relationship your business has with capital. We know that happy, invested employees with a strong sense of integrity, and trust in management and ownership perform at a higher level. As you build the systems that you and your employees will use to fulfill your finance objectives, keep your corporate culture top of mind.
Beginning With The End in Mind
At the end of Leadership, you developed your company’s Strategic Objectives. This is the set of goals that guides your company forward, each objective being a key component to fulfilling your company’s vision. As a part of that process, you set out some Finance Objectives. As you progress through Finance - Managing Your Nest Eggs keep your Finance Objectives in mind. As you encounter new ideas, think about how they can be used to bring about progress toward the goals you have set for your company. In other words, let’s begin with the end in mind, and continue to make progress toward your goals.
Strategic Objective Review
Let’s review the objectives you set that are directly influenced by your finance department. Some of your objectives will need to be carried out by a number of interdependent departments. For instance, you will quite likely have set an objective for revenues. For your company to meet that objective, your operations department will have to be performing at a specific level, creating product, distributing product, or delivering services. Your sales department will have to be busy selling these same products or services, your marketing department will be responsible for marketing them, and your finance department will be responsible for accurately reporting your numbers. Each department will have targets, and action plans for reaching those targets. You will have chosen Key Performance Indicators (KPIs) to let you know about progress made toward those targets, and a system for collecting and reviewing your KPI data.
Review your Strategic Objectives. Do they still make sense? Are they Specific? Measurable? Actionable? Realistic? Time Bound?
|1||On budget||Bob||Jan 1 20XX||All department budgets|
|2||Financial reports on time||Bob||Jan 1 20XX||Report filing dates|
|3||Zero tax penalties||Bob||Jan 1 20XX||Taxes filed on time|
What you will see as you lay out the objectives your finance department has influence on is that, in most cases, your finance department will influence progress toward the Strategic Objective, but each Strategic Objective will need to be broken down into supporting departmental objectives. For Example, your finance department influences profitability in a number of ways, but in most cases it does not have the power in and of itself to determine profitability. For that reason, you will want to set objectives for your finance department that support each overall Strategic Objective. Profitability is made up of two components, revenues and expenses. You may decided that your finance department will need to reduce expenses in order to contribute to the overall profitability goal. On the other hand, you may decide that your finance department will need to bring in some high-priced talent in order to right your ship, and you will have to increase your finance expenses in the short term in order to achieve a significant profitability increase. Whatever the case, you will need to decide on a course of action, set your targets, put action plans in place to achieve them, and KPIs in place to measure your progress.
Pick the two or three most important Finance Objectives that fulfill your Strategic Objectives. The remainder of this section will give you the tools to help you meet your Finance Goals.
In this chapter you should have designed, shared, and made a plan to review your:
- Objectives for your Finance Department based off of your company's Strategic Objectives.
- 3-5 KPIs to track your progress toward your top Financial Objectives.