As a small business owner, or as the CEO with an executive team, your attention to the finances of the business is a must in today’s very challenging business climate.
When you really think about running a small to mid-sized company, it is unlike reading a book, rather with a business, you start at the end, and then do everything you can to accomplish that end point. With this view in mind, solely looking at month end financials will not allow your finances to drive the business, rather your finances become the outcome not the cause.
Yes, historical financial results are important, but they only serve as raw material for the road ahead. All the action is in the present moment decision making with an eye towards a future outcome. This is the the value proposition of the rolling forecast method of running a business.
Back in 1983 when I was running my software company, I got at bit over my skis just after taking the company public. I decided to bring in an experienced consultant named Gene White, who was on my board of directors at the time. Gene, started and built a New England high-tech company to over $1 billion in sales, through over seventy diversified business units. He introduced me to the rolling forecast method of running a business, and I can honestly tell you that these principles are categorically applicable to anyone who wants to achieve predictable financial results.
Unfortunately, you will have no choice but to build this forecast with the help of someone with experience, and you probably will not find your accountant qualified or close enough to the business, and generally accountants are excellent at being historians versus dynamic business planners. Don’t expect this out of an APP either, as that could never track the web of dynamic human and environmental factors that you’re trying to manage today.
Lastly, applying these financial principals of the rolling forecast are not mutually exclusive of the well-being of the company’s employees and other stakeholders. If you or you key leadership team is not doing this type of financial planning today, then you are putting the future welfare of the business at risk, which essentially is the goose that lays the golden eggs.
It is not that complicated a model, it just takes the leader to value this method, and then put a regular monthly process in place to update or change the course towards the year end goals that you have in mind.
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