1, the figures do not necessarily show a latent cash crisis
For example, the financial statements on the Accounts receivable seem to guarantee cash flow, but these may be uncollectible bad debts. Attention should also be paid to non-financial variables, as financial statements are more or less artificial and not current enough to be a valid assessment. Therefore the company should carefully monitor quality and the production line becomes a pointer to the soundness of the company.
2, cash flow is the key
"No cash, no credit" has become a law, but many managers are still on the company's flow of no vigilance. For example, when the stock price of a medical device company collapsed, the company's board of directors thought the company was healthy and had sufficient cash flow, but the management consultant who helped rebuild the company found that the company simply could not pay salaries, and the banks tightened the money, making it difficult for the company to survive. This is not an exceptional case.
To avoid this, there are two cash management tools that the board and management team should have in place:
A. A thirteen-week period of detailed cash flow based on actual receipts and payments, rather than on expected profit and loss. Since this is not something that a typical accounting system would provide, the supervisor must first make a mindset adjustment.
B. Longer-term cash forecasts, and must be able to show major loans and capital expenditures. More importantly, of course, make good use of these management tools.
3. Fixing the company, not revising the statements
If most of a manager's time is not spent running the company, the company's operations are in danger. For example, if the management team, with the acquiescence of the board of directors, tries to inflate the stock price, only wants to beautify the financial statements, and doesn't think about improving the operation, it will only bring the company to the doom.
Every company has operational weaknesses. It is not like a machine that has a fixed output and input, but like a biological cell that tries to adapt to harsh environments. Most people are afraid of change and avoid it, but it is always better to address weaknesses early. After all, the longer a problem is delayed, the more it will cost, the less capital will be available, and the fewer solutions will be available.
4. There is no such thing as "too fast"
The earlier the reform, the more room for improvement.
Nowadays, companies are going from strength to strength faster and faster than in the past, so it's important to take the time to reform.
5. If it's not broken, it's broken
Good companies make continuous improvement part of their culture. Even if a company seems to be doing everything it can, there's still room for improvement, for example, in processes and customer relations. Therefore, companies should rotate some departments to make big changes, so that employees can get used to the change and understand the company's insistence on improvement.