Are Your Profits Going Up in Smoke While Your Controller Watches?

By Rich Bond

They say Nero fiddled while Rome burned. When working with business owners, I often discover that the company’s controller can see profits start to go up in smoke, but they don’t do anything about it. On the other hand, I’ve seen how a new controller can come in with new tools, knowledge, and perspective and issue warnings even before the cash-consuming fire gets going, let alone, out of hand.

A good controller will track monthly statistics called Key Performance Indicators (KPIs). And they will share them with you. This can act as an early warning system so that you can take evasive action and keep your cash from being incinerated.

In one case, the controller in a company with significant production lead-times knew enough to track their order backlog. When that indicator declined three months running, he saw trouble ahead. Armed with the warning, the company’s management delayed a major capital investment and instituted cost-saving measures. Within three months, sales for this company and its competitors had fallen by over 25%. But the business weathered the industry downturn better than its competitors, preserved a solid level of profitability, and had fewer layoffs because their early warning enabled them to take action before sales declined.

A good finance person is a strategic partner to you, warning you of potential shortfalls and making you aware of profit opportunities.

Unfortunately, most finance people in privately owned companies are like Nero. Do you agree?  Or is your finance person a strategic partner?

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