CAN MANAGEMENT ADEQUATELY PREDICT YOUR BUSINESS'S LAIBILITIES? PART ONE - MANAGEMENT
If I was to ask you, as a business owner, senior manager or professional business person to adequately predict the nature and dollar value of your business's liabilities, could you?
Unfortunately, I suspect, many of those asked, could not do so. You will note, I am not asking you for the impossible as to where every liability lies, or to nominate the actual dollar figure of these liabilities. That is not a feasible question. What is reasonable to ask is "What are your firm's liabilities and what is the approximate cost of these liabilities?"
If you cannot adequately answer this question, why is this so?
I suggest it starts with the issues faced by management today, 10 of which are listed below.
1 The commercial focus of business today which is inevitably focused on short term results and not on long-term survival.
2 The lack of management mentors from the old world of business who accepted their role and fiduciary duty was to protect the long-term viability and integrity of the trading entity that employed them.
3 The lack of support from the Board, their fellow senior managers and shareholders, who are often focused more on their needs rather than on the needs of the business.
4 The increasingly lack of organisational discipline in (i) managing the accounting functions of accounts payable and receivable, (ii) the selling the business's goods and services and (iii) understanding the true trading relationship with their customers and suppliers.
5 The lack of understanding how society and people have changed over the last decades and the erosion of personal and organisation responsibility as a result.
6 The emasculation of their business's rights due to government regulations and legislation, plus the increased costs of legal action, has made the cost of protecting the organisations rights almost unfordable.
7 An understanding on how those who wish to cause damage to the business, seem to have increasingly more opportunities to achieve their objectives without due cost to themselves.
8 A focus on costs rather than efficiency.
9 A failure to learn the lessons of history and on the negative factors which have affected and continue to affect their business.
10 A lack of common sense.
Most organisational causes of liabilities start within the management team. A brief outline of the factors which affect management's thinking and actions directed at understanding the business liabilities have been put forward.
It is only by properly looking out for and managing problems, that we can begin to get on top of business's liabilities. Do that, and the negative costs spent to eliminate preventable liabilities, will reduce and profits will increase.