How often have we seen the accountants pushed aside, the decision-makers not respecting their input on the company’s plans. “Oh, what do you know about the business” is typically the unspoken attitude. However, in these economic times, accounting and finance play an even larger role in the company’s plans. Let’s face it; at the end of the day, businesses need to make money. If we can’t position the company or enterprise to accomplish this goal, then we will be out of jobs as our companies, one after another, file for bankruptcy. Accountants are similar to the quality control people, establishing quality systems, keeping a careful eye on our P&L activities, and helping us avoid financial failure.
Accountants often get a bum rap. They are frequently the butt of many jokes. I particularly like the one that describes the difference between an economist and an accountant. The economist is the individual that didn’t have the personality to become an accountant. Yes, most accountants are schooled to look at the world conservatively. When we compare this view of the world with the confident view that most sales and marketing individuals possess, somewhere in between lies the appropriate answer for success. In an economic downturn, we need to be more careful when assessing the probabilities that a particular strategy can be achieved. In such times, the pendulum of responsibility favors the conservative attitude of the accountant and leaders must be willing to listen.
The challenge we face now is assessing the probability of whether the economy will improve. Financial professionals can help with these assessments and suggest strategy based on their keen insights. They can remind us that if we behave like the economy will turn around and it really doesn’t, then we may be left holding the proverbial bag. With capital markets closed down there is even a greater responsibility to generate free cash flow. Most financial experts will agree that it’s a foolhardy risk to think that the economy will bail us out. To err here is almost the kiss of death.
Now that doesn’t mean close down all the strategic initiatives that are underway. What it does mean, however, is to look at those activities in context to the rest of the world and the competitive landscape. Any financial executive will say that all companies are dealing with the same economic environment and now is the time to do those activities that will enable you to persevere until there is overall economic improvement. As I once heard in a meeting, let’s get rid of the appendages (headcount and discretionary spending) that we do not currently need. We can grow them back when conditions improve.
Also, for those companies that have a product that is on the margin, you will likely have a tough go of it. The value proposition must be very clear and there is not a lot of room for “nice but not necessary” products or services. Again, your financial staff can help you quantify this value proposition.
Compare your accountant’s conservative plans with those aggressive plans from others. Herein lies perspective on the business. Assess the risk and model out what the likely scenarios might resemble. In slow times, careful assessment can’t be careful enough—especially when it may mean having cash or not.
Each leader needs to ask the tough questions and identify the relative risks of any particular strategy. Let your accounting team make sure your strategy doesn’t leave you with empty pockets.
Now ask yourself… Am I a Leader?