Financial Checkpoints

For every business there are certain points in time that are ideal for assessing the progress of the business from a financial perspective. I think of these as financial checkpoints.

Just What is a Checkpoint?

For our purposes we can define a checkpoint as a time or item (or group of items) to assess. Some of these are obvious. For example, monthly, quarterly, and annual financial reports are typically carefully reviewed by a business. Before leaving this obvious checkpoint, I want to also mention that many companies really take very little corrective action, in which case they have wasted an opportunity. For example, if administrative expenses have grown faster than sales, is any action taken or does management simply say, “Wow, we sure are spending a lot on admin.”

Some More Checkpoints

Some less obvious financial checkpoints include:

  • Budget preparation
  • Marketing planning
  • Review of personnel needs
  • Payroll preparation

Unfortunately these are frequently overlooked as an opportunity to improve financial performance. Let me explain.

Too often when creating a budget companies just tend to look at the prior year’s result, use it as a starting point and add more costs based on projected sales increases. But, is that logical? Who says that more sales mean more spending in support functions or even in the sales area? Often a much higher level of sales can be supported with the same level of spending and perhaps even less.

Marketing planning is an area where financial discipline often gets lost. There can be the attitude that more spending on marketing necessarily means more sales and profit. Whatever happened to the concept of testing some marketing ideas before jumping fully on board with them?

Ask any department if they are staffed adequately and you are likely to hear something like, “Well, we’re getting the job done but just barely. We could use a couple more people” Oh really. Maybe they just need to reorganize how things are done, better train existing employees, or perhaps replace some of those they have with people who are a better match. It may be they realize they are actually over-staffed once they work through an evaluation of actual needs.

Payroll preparation creates an ideal time to stay on top of personnel costs. In particular, look for things like growing overtime expense. It may be justifiable but often it is the result of poor planning and utilization of employees. Also, if you are using temps or contract employees be sure to keep close tabs on what you are spending as it can quickly get out of hand.

Seize the Opportunities

These are just a few of the possible things to consider, but the main thing is that every business needs to use financial checkpoints to see if they can improve financial results. Often it is a matter of minor changes to produce big results.

If you want to know more, contact AimCFO – Contact

As always, your comments are welcomed.


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