Regardless of the size of the business, the ultimate responsibility for success lies with the CEO.)
And the most critical CEO tasks that result in success or failure lie in the knowledge and practice of financial management fundamentals.
photo: The most critical CEO tasks that result in the success or failure of a business lie in the knowledge … [+]GETTY
Recent statistics show that over half of small businesses fail within the first four years. Clearly, that mortality rate could be significantly reduced if, before a business opens, the founder/CEO was required to pass a course that teaches business financial fundamentals and how to operate a business with them.
Don’t worry. Your humble advocate would never presume to lump you in with those who need business finance schooling. You, no doubt, are squared away on that score, but perhaps you know a small business CEO who isn’t. And let’s say you’re keen to give that CEO – your “friend” – the maximum opportunity to avoid becoming a marketplace battleground casualty.
If so, here are eleven of the key elements (in no particular order) that you could pass along to your friend as the curriculum outline of that small business survival course. And can encourage him or her to learn more as they become professional, successful, surviving CEOs.
1. Veteran CEOs don’t do their own accounting – they’ve learned how to manage with regular (at least quarterly) financial statements (balance sheet and profit-and-loss) produced by a professional accountant.
2. Successful CEOs know their gross profit margin – both the percentage, for pricing purposes, as well as the actual number that’s essential to cover their corporate nut every month.
3. Smart CEOs track sales-to-expense ratios – so they know what marginal spending to adjust every month, instead of at the end of the year.
4. Savvy CEOs closely monitor inventory levels – matching it to projected sales, receivables and cash.
5. Real CEOs know their Accounts Receivable days and Accounts Payable days – because the relationship between the two has a direct impact on cash management and funding growth.
