The success of a well-run business is not determined by its financial performance levels alone, and that is why leaders need to take a holistic approach and consider how each area of the establishment and decisions made about specific contributions to the company can build it up or weigh it down.
As you work towards achieving your financial goals, it’s also important to find the right balance and prioritize how to maintain a steady cash flow and make wise choices about how and where to invest your time and money to elevate the organization.
Below are 16 members of Fast Company Executive Board to share some of the best practices they’ve received about how to manage their company finances.
1. DEVELOP A LONG-TERM PERSPECTIVE.
As Warren Buffet says: “Think long-term.” As a manager, you have to live months or years ahead of where your company is now. Ask where you want to be in a year and invest appropriately. Whoever you see succeeding today, made their preparations long ago. This philosophy enabled us to consistently grow by 25 to 30% year after year and make it to the Inc. 5000 list for the past two years in a row. – Andrei Kasyanau, Glorium Technologies
2. TRAIN AND DEVELOP YOUR EMPLOYEES.
Investing in your employees and their growth potential is one aspect that not many entrepreneurs think about. Setting aside a budget for learning and development every month, so your employees are encouraged to upskill, is related to finances because a more educated workforce will help bring in and cater to more valuable clients. When employees grow, the company grows, and so does your financial standing. – Candice Georgiadis, Digital Agency, Inc
3. INVEST IN A STRONG LEADERSHIP TEAM.
Strong leaders aren’t cheap. While it may seem counterintuitive to invest in high-paid employees, I was told that it’s a critical component that allows for scalable growth. I’m grateful for that advice because it has enabled consistent growth in my business for the past several years. – Jason Hennessey, Hennessey Digital
4. ENCOURAGE FINANCIAL ACCOUNTABILITY.
Manage your company as if you were managing your own personal life. Be aware of your cash flow and how you treat debt and encourage your employees to do the same. If you take ownership and foster a culture of accountability to treat all company money as if it were your own money on the line, you will create a business where others feel empowered to understand and properly manage profit and loss. – Petty Rader, Ergobaby
5. TREAT CASH FLOW LIKE A PARTNER.
Respect cash flow as if it’s another partner in your business. Do not raid it, borrow from it, or abuse it, especially in the early days. We have a forecast we update monthly so we know our cash flow every single month, and what it will be in six to 12 months from now. It has helped us to absorb the natural up-and-down cycles of a startup and ensures we can always pay our team and our vendors without an issue. – Kevin Namaky, Gurulocity Brand Management Institute
6. GET SAVVY ABOUT YOUR SUBSCRIPTION SERVICE OFFERINGS.
The best financial advice I’ve received is from Salesforce CEO Marc Benioff, which is to sell our subscription services to our customers with annual upfront payments under multi-year contracts. This has enabled our cash flow to grow ahead of our recognized revenue and increase our customer retention rates by accelerating cash flow and improving customer retention. – Godard Abel, G2
7. MAINTAIN A HOLISTIC FINANCIAL PERSPECTIVE.
To see financial performance as only one indicator of overall company success. While we are disciplined about working towards a financial goal, we make sure we are also investing in our wellbeing, expertise, and growth. By having this holistic perspective, we are able to handle any financial volatility with minimal stress. – Padmini Sharma, Jester&Genius
8. GIVE YOUR STAFF A RAISE.
The best advice I received is from financial advisor Tamar Hermes, who told me to consider raising how much I’d budgeted for my team. She said to me, “It exponentially increases your bottom line when you think ‘How much time did it save me to not have to do this work?’ It was scary at first to decide to pay my team more than I had been. And it’s paid off over and over. – Anna David, Legacy Launch Pad
9. STAY IN YOUR LANE.
You cannot be an expert at everything. Trying to do it all yourself just to save money will likely cost you more in the long run, so knowing when and where to bring in expertise to help you is critical. Don’t be afraid to outsource other areas of your business until you are on solid ground and have a better idea of what you can handle in-house. – Jan Bednar, ShipMonk
10. KNOW YOUR NUMBERS.
We track and monitor daily a few key metrics that indicate the company’s health. It’s bewildering how many business owners don’t understand the core metrics that keep their business healthy. Every company has a top and bottom line, but those are trailing indicators. We can get ahead of problems before they show up on a profit and loss statement or balance sheet by focusing on leading metrics. – Austin Vance, Focused Labs
11. GROWTH IS EVERYONE’S JOB.
“Growth is everyone’s job,” said one CFO of a Fortune 100 after asking me what my opinion was on what his marketing team felt their job was. People can get lost in role definition without understanding how the business makes money. – Michelle Hayward, Bluedog
12. NOTHING COMES WITHOUT A COST.
The best financial advice I received was that nothing comes without a cost, and we need to understand what is at risk. When you know what is at risk and get comfortable with it, you can move forward regardless of the outcome. When you understand that nothing comes for free, you are willing to see what is on the line and what the true value is to you. – Tony Martignetti, Inspired Purpose Coaching
13. LIVE WITHIN YOUR MEANS.
Live within your salary and then invest the difference for future growth. I have used this advice to guide expenditures and investment decisions. We have kept our expenses in line with the plan and invested for growth in marketing once we achieved our margin target. Planning for both operating your business and investing for growth is vital for long-term success. – Matt Domo, FifthVantage
14. PRIORITIZE YOUR SAVINGS.
Save when you can’t afford it. Have a fixed amount of money taken out of your bank account every month that’s invested in something you can’t touch, and that compounds over time. You’ll wake up one day with a bunch of cash you didn’t think about. Treat that investment like any other critical “expense” in your business, like a mortgage. – Mike Koenigs, The Superpower Accelerator
15. START SMALL AND TEST THE MARKET.
When starting a new business or launching a new product, start out small. Take the time to really test your concept before scaling your business. Not doing your homework to confirm you have a viable product first can wind up being a very costly mistake. – Kelley Higney, Bug Bite Thing
16. WORK HARD AND STAY FOCUSED.
The best business financial advice I’ve received was from my father when he told me that if I wanted to be successful then I needed to work hard and focus on my goals. He also told me that it’s important to have a financial plan for the future so that you don’t end up in debt. – Kristin Marquet, Marquet Media, LLC