The Art of Financial Story Telling
In most management meetings the financial discussion is disjointed and most of the team has no idea what they are looking at. In particular almost no one around the table understands the cash flow and how their behavior impacts upon the numbers.
Your business is no different to watching a sporting event. A key component in watching sport is having a scoreboard available. Your company is no different. You need to teach the players in your company how to understand the scoreboard and the levers they can pull to improve Profit, Cash and Valuation
As leaders we are all reading Chapter 1 over and over and then confused why we don’t understand the result of our business.
- Chapter 1 - Profitability
- Chapter 2 - Working Capital (Accounts Receivable, Inventory or WIP in a service company and Accounts Payable)
- Chapter 3 - Other Capital (This is the rest of the balance sheet and is mainly investment in Fixed Assets )
- Chapter 4 – Cash Flow (the result of the business is the funding. A quick way to calculate Chapter 4 is the movement your Cash at bank and borrowings)
Your management team needs to understand very clearly every number in chapters 1 and 2.
My key message for business is NO SURPRISES. If you understand the 4 Chapters you will understand your Cash Flow. If you understand the Cash Flow you will understand your bank who are focused upon your cash flow as measured by your capacity to repay