A financially troubled company faces obvious signs of potential failure—such as phone calls from service providers asking for overdue payments, high employee turnover, or rapidly declining sales taking a hit to the bottom line. Often, the underlying issues that led to such overt problems can take a while to rise to the surface—and could have been preventable. By questioning whether you are aware of potential business weaknesses at your emerging growth company, you could get ahead of them.
Becoming More Aware of Problems—and Being Proactive
A smart question to ask: What is the best way to identify business weaknesses? Sometimes, you may be so caught up in your core responsibilities that a weakness or emerging risk within the company may be overlooked. This is where finance consultants can really help companies get ahead of issues as they know exactly the right questions to ask; they’ve seen pretty much every scenario at the many companies they’ve supported and advised, and their fresh perspective can shed light on an issue that may not be so clear to you or your team.
They may recommend taking a close look at the state of the financial operations, to ensure that your company can keep tabs on any weaknesses and address them head on. The problem could be that your business is not set up to sense how the business is really doing. Your accounting systems may be outdated. Processes may not have kept up with the pace of growth. You may have lost touch on the true cost of goods sold. These factors and many more can interfere with your ability to see the business weaknesses interwoven in your financial operations.
Addressing Problems Head On
What are the signs that your business is in trouble and may be headed for failure? By enhancing the visibility into the business, and closing in on information that better help you understand what’s going on under the financial hood, you can get a better handle on potential problems or foresee them going forward.
Do you have the right systems and processes in place to not only produce reliable, timely financial information but to glean insights from it? Do you track pertinent metrics that can help you measure the health of your business? You want to be able to quickly spot anomalies and be able to implement changes when necessary. If the finance function struggles to close the books every month, for instance, you won’t be able to confidently rely on the information you are receiving—or confidently make decisions based on it.
The Importance of Identifying Strengths and Weaknesses in Business
How can you correct problems before it’s too late? For emerging growth companies, we recommend taking the RoseRyan Rapid Assessment to better sense the financial health of the business. This is similar in some ways to a SWOT analysis of a company or a SWOT analysis of a business. An evaluation of 16 fundamental areas of finance and operations can reveal whether your understanding of the business is accurate and uncover any gaps that could be preventing you from growing and scaling the business. Once you see where the problems are, then a plan can be put into motion for improvements. You may find that not everything can be tackled at once. Finance consultants can help you prioritize.
Common Mistakes and How to Correct Them
What are some of the biggest mistakes businesses make in financial matters? One of the biggest is a loose grip on cash flow. If your company hasn’t been accurately tracking incurred expenses, or if the collection process is pretty lax, you could face the risk of cash flow issues taking the company on a downward spiral.
Companies that respect the mantra “cash is king” and that properly tend to their finance function, by understanding where the expertise gaps have opened up and knowing when to bring in more senior level skills, such as a part-time controller, can set themselves up to avoid serious, unexpected problems. A robust finance function, which can be a combination of outsourced finance and accounting experts in addition to steady, full-time employees, will bring visibility into what is happening today and the possibilities for tomorrow. They can help manage the risks facing the business and prepare it for potential issues, and help make swift changes when conditions change.
When You Need Help Finding the Trouble Spots
An outside expert perspective can help pinpoint the trouble spots before they become too big a deal (such as breaching debt covenants or running out of cash). RoseRyan’s Emerging Growth Solution provides a multi-layered approach to venture-backed startups so that common financial issues are proactively addressed, the realistic potential of the company becomes clearer, and strategic goals are backed by up-to-date, reliable information.
Your emerging growth company could be on the right track—or it could use some expert help to re-right itself. Take the Rapid Assessment for Emerging Growth to reveal the finance trouble spots at your company to understand what’s hindering your growth strategy. Reach out to RoseRyan today.
