It is baffling to experts. Why won’t business owners learn how to read, understand and manage their financials? Why don’t they want to control their money? Why can’t they realize that the better they control their money, the better they control their business?
The answer is simple – owners are human beings first and business-people second.
All human beings are illogical about a lot of things (i.e., children, dreams, spouses/relationships, jobs, politics, hobbies, goals, expectations for other people). Our emotions affect our decision-making skills all day, every day. Everyone has exhibited bad behaviors, made poor choices and acted on unsound judgments based only on how they were feeling at the time.
We are particularly irrational about money and finances. If you cannot immediately come up with five names of people who have made poor financial decisions, then you have not been paying attention. You, also, have not been paying attention if your name is not on the list. It is a given that we can be our own worst enemy when it comes to making good financial choices.
But, that is a destructive and frustrating way to run a company. There are better ways. We have all asked ourselves, “What was I thinking?” and had the answer be, “I wasn’t.”. However, that does not have to be your answer; you can change it. Knowledge is power, and it can help you get control of your money, your life, and your business.
The positive characteristics – independence, self-reliance, stubbornness – which made you a success also have a negative side. Most business owners do not want to admit when they are wrong about or do not know something. They also do not want to ask for help. But, believing you know everything there is to know about running a company is unreasonable and irrational.
This is one of the reasons owners make bad decisions in uncertain, uncomfortable or unknown situations. When they have no or poor financial information the more likely they are to make mistakes in productivity, quality, sales, estimating/bidding, inventory, personnel, salaries, etc.
When we are faced with problems our mind usually does not pick the rational solution, it picks the easiest one, the one that feels the best. But, feelings are not facts and giving feeling based answers is a very poor management strategy. They are often wrong.
Overwhelmingly, when an owner learns how to read and manage via his financials, his response is, “I don’t know why I didn’t do this sooner. It makes everything so much easier. I have all the information I need and know exactly what is going on in my company.” Your financials will immediately tell you the health of your company. When you understand and have control of your financials, you have control of your business.
At Cogent Analytics, we never stop looking for ways to improve your business and neither should you. So, check out some of our other posts for helpful business information: