It has now been 2 years, since February 2020, when I started this Blog that focuses on issues pertaining to Family Businesses & SMEs, with this being my 200th Blog Article. I have recently launched a survey (you can still fill it in) on the issues faced by family businesses and the preliminary results shows that the top identified issue is the “Lack of regular reporting on Financial Performance and Key KPIs”. This is rather worrying.
The lack of regular reporting means the following:-
- The decisions being taken in the family business are not data driven and are being taken on notions and concepts that are not necessarily based on reality.
- The the family business lacks proper internal control systems, with dire consequences that could even result to the downfall of the business. The family business owners have no idea of whether and to what level is their business carrying the brunt of human errors, people that are abusing the lack of internal control systems and others who could be possibly tampering with figures.
- No capabilities are being developed in the family leadership to interpret and analyse well the financial information presented to base their decisions on such information. It is likely the family business leadership lacks to skill to properly understand and interpret financial data.
- Lack of scrutiny on who is preparing the financial reporting to make sure that this is done using constant policies and approaches
- Such businesses have no way of detecting issues effecting their business, before it is too late. Usually they face a huge problem when they face huge cashflow issues, which is likely too be a tad too late to salvage the business.
- Such family businesses are also hugely disadvantaged as they are in no way ready to quickly access financing they might need, as they would need to present their latest financial reporting to anyone willing to finance them.
It is normally the case that the lack of regular financial reporting is linked directly with the lack of proper corporate governance in the family business. These topics and how to address them will be discussed during the upcoming FREE online live event on issues facing family businesses, to be held on Tuesday 8th March at 6pm. Click HERE to register your interest.