Financial Management And Risk - Jo Haigh

The old Yorkshire saying of “where there’s muck there’s brass” may not be the first thing that comes to mind in terms of financial management but if you look at the origins of the quote, which means where there are dirty jobs to be done, there is money to be made, it’s actually more than pertinent in these strange and revealing times. 

Those businesses that have cleaned up their act in the downturn, trimmed their staff down to the most effective; got rid of the dog products and even customers, if you like – got rid of the muck, surely now stand better placed to take advantage of the upturn when it comes! 

The trick, of course, is to make sure you don’t let the muck gather again. 

Here are some critical must do’s to manage your financial risk:-

1. Make you bank manager your best friend moving finances will be difficult and likely to remain so for some time.  You need him or her to be as naive as possible.
2. Produce monthly management accounts and information on comparison to prior year and budget rigorously. Investigate any deviation from “plan” however minor. Get the information out as soon as possible after the month-end – 10 days at the latest.  In the meantime have weekly if not daily flash figures so you can take any remedial action sooner rather than later.
3. AKA Margaret Thatcher – Manage your Housekeeping Money – if sales are vanity and profit is sanity, cash is bl**dy essential!  You can only run out the once! and when there is no-one to beg, borrow or steal from, that’s it you are bust.  Your funds flow - statements should be a weekly “must do” and if things remain tight a daily “must do”.
4. Don’t put it all on “Red” unless you can afford to lose it.  Things may pick up but we are not clear yet and there is a chance it’s a dead cat bounce!!  That isn’t to say there aren’t some bargains around and I am not risk adverse I am just advocating a degree more caution than perhaps you may be used to.
5. Illegitimi non carborundum – stay positive but be realistic – don’t over-egg your performance with your funders, you get black marks for promises not achieved and in this case black marks make anything but prizes.
6. Manage your debt and your debtors!!  Stick to your banking covenants like a leech, as banks are still looking for exit routes. Don’t do business with people that won’t pay, and there will be lots of them sadly.  If in doubt get pro-forma or even PG’s – I realise that could cost you lost sales but what good is a sale to a customer who subsequently goes bust – let some other sucker have that problem!