Wednesday, July 2, 2008

money is made of paper

Recently, my daughter attempted to put a stop to my granddaughter's desire for every item on the store shelves by saying, "Money doesn't grow on trees." In her inimitable 5 year old style my granddaughter quite seriously replied, "Mommy, money is made of paper and paper comes from trees."

While a child doesn't understand the value, or worth, of money we, as adults, should. Especially as business owners. Unfortunately, all too often, I have to have a heart-to-heart with a client about their organizational spending habits and fiscal responsibilities. Most recently, an organization I've been trying to help develop chose to purchase an item that was neither necessary or affordable. It was so far out of their budget that in order to make good on the payment they cut a half-time staff position. That is, they let an employee go. It was also the end of our working relationship.

I cannot emphasize enough how important fiscal responsibility and good judgment are to business success. Here are some tips to help you appreciate that money, like the trees it's made from, is not in unlimited supply.
  • Be organized because if you aren't you'll spend more time and money than you actually have. Create good filing systems so important documents can be saved and easily retrieved. Have policies and procedures in place so expectations are clear. Use a good accounting software and a bookkeeper.
  • Fiscal responsibility is vital to financial success - if you can't manage a dime you'll never be able to manage a dollar. Have a budget as part of your strategic plan. Review financial reports regularly as part of your management decision-making process.
  • Invest in the tools and training that will increase your chances for success.
  • Maintain a paper trail. That is, make sure there is sufficient documentation to substantiate your decisions and their outcomes.
I just received a call from a board director of an organization in need of a little help. Apparently, the only board documentation they have to direct their processes are the original Bylaws. He told me he was concerned that the board could not fulfill its fiduciary responsibilities appropriately because they only met once a year, didn't keep minutes, didn't have an indemnification clause in their bylaws, and lacked policies and procedures. Further, it hadn't had an audit done in several years and the IRS took administrative action regarding their exempt status.

This situation occurs more frequently than you might imagine. When I talk with clients about building their organizational capacity this is exactly what I'm trying to help them avoid.

Susan Powter, a health and fitness guru from the 90s, stressed that in order to be healthy you have to eat, breathe, and move. To succeed in business you have to plan, act, and monitor.