#004: SME Owners' Problem with Their Finance Teams #4 - "They Cannot Craft Solid Financial Strategies"

Dear Finance Professionals,

I hope this message finds you in great spirits.

In this edition, we delve into a crucial aspect that significantly impacts the long-term success and agility of SMEs: the ability to craft and execute a sound financial strategy.

The Problem

Today, we explore a significant challenge that many SME owners face with their finance teams: the lack of a solid financial strategy.

Often, finance teams are proficient at managing day-to-day transactions and producing detailed financial reports. However, when it comes to strategic financial planning—anticipating future needs, managing risks, and identifying growth opportunities—there is a noticeable gap.

This absence of strategic foresight can leave SMEs reacting to events rather than proactively managing them, resulting in missed opportunities and suboptimal financial performance.

A story

Let me share with you the story of Naomi, the CFO of a mid-sized manufacturing company. Naomi inherited a finance team that was very good at reporting numbers but less experienced in forward planning.

During a period of economic downturn, the company faced significant financial strain. Naomi realized that without a strategic financial plan, they were merely reacting to events rather than preparing for them.

It was a challenging time that taught her the importance of strategic financial leadership, leading to a complete overhaul of how her team managed financial planning.

Ajibola's Tips

Apply these tips to transform your role from a passive observer to a proactive strategist. By becoming more involved in financial strategy, you can help your SME anticipate challenges, capitalize on opportunities, and steer towards sustained profitability and growth.

1. Develop a Comprehensive Financial Model:

Think of this as your map for the future. Build models that reflect not only where your finances are today but where they could be tomorrow.

Action Tip: Regularly simulate different business conditions to see how they might affect your finances and use these insights to guide your strategic decisions.

2. Engage in Regular Strategy Sessions:

Just as we would sit down and plan a family event, gather your key stakeholders regularly to align on financial goals and strategies.

Action Tip: Make these strategy sessions a fixed part of your calendar; this consistency helps keep everyone aligned and responsive to changes.

3. Implement Rolling Forecasts:

Like keeping an eye on the road ahead, move beyond static annual budgets to more dynamic rolling forecasts that adapt as conditions change.

Action Tip: Update your forecasts at least quarterly, integrating the latest data to ensure your strategies remain relevant and proactive.

4. Focus on Strategic Cost Management:

Every dollar spent should build towards something bigger. Identify where you can manage costs more effectively to fuel growth and stability.

Action Tip: Regularly review spending patterns and assess the return on investment for major expenses, prioritizing those that offer the greatest impact on your business’s goals.

Grow with Us

To further sharpen these skills, why not join our FBP Masterclass in June 2024 ? It’s a chance to learn, share, and grow together, strengthening your strategic capabilities.

Conclusion

As we wrap up today’s chat, remember that your role is about more than keeping the books—it’s about guiding your business towards a successful future. Subscribe to stay on this journey with us, growing into the strategic leaders our businesses need.

Together, let’s ensure our businesses aren’t just surviving, but thriving.

Take care and keep leading with insight.

Cheers,

Ajibola