I hear this question a lot when I prepare end of year or management accounts, when the managing directors see the costs and wonder why they have not made as much profit as they predicted.
A lot of the time is that a lack of controls on spending or budgets are not adhered to by the finance department. But one of the factors I have seen is that if there is more than one director in the company is that the directors do not speak to each other and spending goes out of control. I’m not saying that directors spend willy nilly, but they have to set out parameters on controls in the company.
A lot of companies do not have controls and this causes confusion, frustration and ultimately the downturn of efficiency of the staff and directors within the company.
The successful companies I see is the ones who have set roles and parameters from the start and everyone knows what they are responsible for, for example, One director who has specific financial skills will be appointed the CFO (Chief Financial Officer), another with operations and staff management skills will be appointed COO (Chief Operations Officer). both with specific responsibilities and controls.
That’s where I come in, I meet up with companies and discuss requirements and where the lack of controls are within the business. I create systems and recommendations on how the company can be more efficient, therefore more profitable.
So pass the word around and if companies are asking this question then they really need to get controls in place and speak to me.