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Friday, February 19, 2010

Keep Yourself and Your Employees Well Informed

One of the things I like most about small businesses is that they can be much more flexible than larger companies.  There are fewer layers of management to convince, no board of directors or shareholders to placate, and far fewer regulations to consider.  Because of this fewer resources are wasted on generating mountains of reports and a never-ending series of meetings.

But some reports and meetings exist for practical purposes.  All companies need to have insight into their business.  Every business should be able to answer some basic questions:
  • Are we making a profit?  
  • If we are not yet profitable are we doing the right things to become profitable?
  • Do we have enough available cash to run our business?
  • What are the amounts in our Accounts Payable?
  • What are the amounts in our Accounts Receivable?
There are countless other questions that should be asked regularly.  Most large businesses so this automatically as part of their month end closing process, and small businesses should do the same.  It is important to do this every month to catch problems early and ensure that the company is moving in a productive direction.

It's equally important to make sure everyone in your company knows how the business is doing.  While you don't necessarily want all employees to have full access to your financials (unless you have an open-book management policy), make an effort to let everyone know about your successes and failures.  A quarterly or semi-annual meeting with everyone is a great way to keep employees informed, and it can also be an forum to receive valuable feedback.
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