The CFO'S Perspective

Recent sad news about the wildfires disaster in California which has destroyed homes, businesses and caused so many deaths is a reminder for us again to consider the future.

…up to 40% of businesses hit by natural or human-caused disasters never re-open.”

According to FEMA, the Federal Emergency Management Association, up to 40% of businesses hit by natural or human-caused disasters never re-open.  They close because their normal processes are overwhelmed by loss:  loss of data, inventory, space, personnel, or all of the above.

I have not failed. I've just found 10,000 ways that won't work.
- Thomas A. Edison

For whatever reason, you've determined that it's time to close the doors and walk away from your business. Shutting down your business may be the hardest thing you'll ever do, but it's not uncommon. In fact, 90 percent of start-ups and early-stage companies close each year in the U.S.

If it's any consolation, most successful entrepreneurs have failed previously at some venture - or several. Walt Disney was reportedly fired by a newspaper editor for having no imagination and lacking good ideas.

Currently the world's richest businessman, Jeff Bezos had several failed ideas before Amazon took off. Most notably, his auction business called zShops never gained any traction. It's important to realize that it's okay to stop pursuing an enterprise that isn't working and start doing something else.

Closing a business, however, involves more than just shutting the doors and walking away. If you do this, you could open yourself up to unnecessary fees, loss of personal and business reputation, and even lawsuits. When making decisions about closing a business,  visibility to see issues coming is vital. Good financial advice is a great place to start.

When business disruptions occur, it can be expensive. Most business owners and CEOs have a model for success in mind, but what about the other side of the coin? Failing to prepare or put contingencies in place for unexpected events can turn a potential blip into a catastrophe.

Increasingly, business owners and leaders are leaning more on their financial teams to help prepare the company for uncertainty. Specifically, the business's CFO is taking on a broader role that includes making sure that your firm will be able to weather unexpected events.

The adage says, “cash is King,” and this could not ring any truer for small and mid-sized businesses. Cash is a crucial component of any successful business, especially startups and new ventures.

Cash flow is the lifeblood of organizational success.

Positive cash flow leads to profitability and provides the funds needed to reinvest in the future of the business. However, proper cash flow management is difficult for many companies to undertake successfully.

Some businesses fail to analyze cash flow projections appropriately to identify potential shortcomings, while others suffer from mismanagement of payment terms and an inability to collect outstanding payments. New businesses are prone to spend recklessly and make poor inventory choices because they lack the awareness needed to make cash flow-centric decisions. Companies struggling with cash flow management often err on several of these key elements, fueling the vicious cycle of cash flow issues.

Business executives who have problems with cash flow at their organizations (or want to avoid future issues) will benefit from earmarking these cash flow tips: