Whether it feels like it or not, the long-awaited economic recovery has begun!
Consider the following: Nationally, estimated economic growth in 2014 will be 2.7 percent or better. As a region, New England’s gross product growth is projected to average 3.3 percent annually through 2016.
And even here in Rhode Island, the signs of an economic spring are present, as the projection for growth in state gross product is 2.2 percent through 2017. These and other indicators point to a turnaround.
After years of stagnation, this is welcome news indeed. We are poised, finally, to return to a season of economic growth. And just as baseball players recently reconditioned from the off season to begin a new season, so too should your business prepare to transition from a period of consolidation or no growth to the pursuit of new opportunities.
Many may assume this transition can be limited to retooling sales and marketing, but that is a short-sighted view. That’s because a business’ key financial and operational infrastructure may have been lulled into playing defense versus being ready for growth.
So, a key issue for any business today is to make sure that years of contraction or weak growth have not compromised the company’s readiness to resume growth and to meet the challenges of motivated competitors.
Here’s what I hope will be a useful “ready for growth” checklist for your business:
Customer profitability analysis. Let’s face it: many companies have probably held onto underperforming clients and customers in order to sustain infrastructure. You should be prepared to shed them in favor of anticipated new customers. But how can you be sure which customers to shed? All businesses should maintain a client-by-client gross profit and margin analysis and be prepared to act on this information.
Inventory analysis. As you emerge from the recession, chances are your company’s inventory “tub” hasn’t been scrubbed to identify outdated or unsociable equipment and product. Perhaps your financial staff has shrunk to a point where this analysis has lagged. Now is the time to make sure you have a crystal-clear sense of your inventory.
Evaluate monthly reporting. All too often, management dashboard reports can regress during tough economic times. But now is precisely the time to be sure to have the right reports at your fingertips … ranging from employee productivity, staffing-to-gross sales ratios to more externally focused topics such as competitor pricing and market forecasts.
Cost analysis. Have you rechecked, on a product-by-product basis, that you are properly allocating all of the costs associated with going to market? You need this information to evaluate pricing and to manage product and service lines.
Enhance controls. Deficiencies in internal controls will create errors in inventory and expose you to economic losses. Updating internal controls will help you safeguard assets and ensure accurate financial statements. More importantly, having well-documented internal controls will ensure efficiency and minimize risk.
Assess accounting staff requirements and responsibilities. As you look over the horizon and spring forward, it is important to determine workload assignments and supervisory responsibilities. Do you have the right accounting and finance team in place? Do you have a team with the proper knowledge base and skill set to help you grow the business? Would it make sense for you to bring in more senior-level accounting/finance staff part time to assist you with planning?
Metrics and productivity. Not having proper workflow metrics deprives management of the ability to develop and implement quality objectives, effectiveness of staff and balance of workloads. Does your current employee- review process analyze the objectives and metrics required to properly evaluate your employees? Do you have an incentive plan to reward those employees that deliver quality and exceed the expectations?
Policies and procedure documentation. If your key employee on the accounting/management team says they are moving to Florida next week are you or someone else at the company ready to step in and do the job? Do you have policies and procedures to allow you to not skip a beat? Are your critical procedures being consistently followed? Do you cross-train your staff for emergency situations?
Period close process. Just as we start our year with a New Year’s resolution, adding a formalized closing calendar and checklist for your team will help avoid omission of critical steps and ensure activities are happening on time and consistently.
In addition, assignment of duties and work flow will provide you with the ability to cross-train staff and provide you with full coverage when employees take vacation or there is an open position in the department.
Chart of accounts. Just as the baseball players’ show up to the game with a bat, ball and glove, you too have to come to the game ready to play. Your chart of accounts should be analyzed and reassessed to ensure that efficient recording supports the reporting you need from your general ledger. Are your entries useful and capturing all that is necessary for the best management information?
The point here is to be sure that your finance function is up to speed. You can be sure your competitors are in assessing their readiness for growth right now. •