Baffled by a business challenge? Are you sure you’re working on the disease and not just a symptom? Let’s start by identifying the difference between a symptom and a disease.
Your child comes home with a fever. The fever is the symptom, but what’s the disease behind it? She was playing in the rain and caught a fever? Or has she contracted dengue fever from being bitten by a mosquito? The doctor diagnoses her with different tests to determine which disease is really causing the symptom. Only after that will he prescribe treatment.
Your cash flow is stuck. Low cash flow is just the symptom. What’s the disease? Did you leave too much slow-moving stock in the warehouse? Did you fail to manage your expenses? Did you forget to collect payments? Do you have the habit of paying your suppliers cash, while you’re getting paid in credit terms?
Unfortunately, many businesspeople find one disease and stop. You think you’ve found the cause and then you start to solve it. In fact, there’s another cause that also contributes to the problem, but you haven’t taken the time to dig further. When coaches work with business owners, our questions help you realize all the possible diseases. And then we help you categorize and prioritize.
Here’s a true story: A business owner needs more cash. He identifies one problem: his clients fail to pay him on time (bad account receivables). However, they do that because their clients pay them late as well. In fact, their clients’ clients pay them late. It seems that this is the trend in the industry. Now the business owner feels stuck. How can he turn this trend around and achieve better cash flow? He’s stuck thinking about accounts receivables but fails to realize that his inventory is poorly managed and his overtime expenses are out of control. But because his mind is stuck on only one possible disease, he doesn’t see any further. We don’t want to ignore the receivables problem, but before we devote our time and effort solely to fix that, why don’t we see if there’s anything else that needs fixing and if there’s a method that can get us quicker wins?
“But, Coach, I hate numbers and I don’t know how to read my financial reports! In fact, there are many months I don’t publish a financial report for my business,” you say.
We don’t all need to think like accountants, but finance is the language of business. And if you don’t know the language, how can you play the game? Imagine you’re playing soccer and you hear your teammate yell “Goal!!” and you don’t know what just happened. Then you see the referee showing a red card, another one showing a yellow card… but you don’t know what happened. You think your job is to just keep kicking the ball in a certain direction. How successful could your soccer career ever be?
What if the numbers in your financial report are simply a story about the activities that happened in your business that month? Each activity will result in the increase or decrease of certain numbers. Change the activity and the numbers will change. What if there is a simple way to analyze the reports that enables you to make better decisions for your business? What if you don’t need to be an accountant to be a financially-literate business owner? What if all that is already available and all you need to do is just decide that you want to learn?
As a business owner myself, I understand there are many people who count on me to make good decisions. My company employs people and they have families. If bad decisions cause my company to be less profitable or even close down, their lives will be impacted. For the sake of living up to our responsibilities as a business owner, think about expanding your knowledge in finance so that you can make wiser decisions that help you reach your dreams and take care of the dreams of your employees.
Coach Cynthia is the Founder of ActionCOACH South Jakarta, a business coaching firm that assists business owners to grow their business with proven frameworks. For a complete Financial Mastery package, contact [email protected] or actioncoachsouthjakarta.com
