THE 5 A's OF FINANCIAL MANAGEMENT

The list below also includes my favorite practices for each activity in order to provide some context.

1. Anticipating Financial Needs | 

 

Short-term weekly cash flow projections accompanied by 12–18 month driver-based financial models reveal a company’s liquidity needs. Both tools need to be updated regularly.

2. Acquiring Financial Resources|

 

Most businesses already have existing banking relationships. My favorite practice is to keep the lenders updated monthly after the financial are updated (quarterly at a minimum). Around 90 days before the LOC is up for renewal, a bank package including recent financial history, new strategies, and projections should be completed and then presented to the lender. I’ve been doing this for years with nearly a 100% close rate on renewals and new financing for term loans.

3. Allocating Funds in Business | 

 I work with businesses generally under $90 million in revenues. Our spending is typically driven by an annual plan or budget. We spend accordingly. When great opportunities arise, we look for cash to make these investments. In small business, asset/cash allocation is more informal compared to its big company counterparts.

4. Administering the Allocation of Funds | 

 The best and only practice is rock-solid accounting and financial controls. For the LOC, processes should be in place for drawing and paying down line if not done automatically by the bank.

5. Accounting and Reporting to the Management | 

 The best and right practice is to  have financials completed by the second or third day of the new month. The financials accordingly need to be timely, accurate, and meaningful.