Certainty and confidence – critical factors in seeing the bigger picture and avoiding a short-termism approach
Friday, 30 Oct 2015
In my recent blog post I addressed the importance of having a structure that allows you to plan for the future, while also being able to act in the here and now. But this requires a certain confidence that what you are doing in business terms is ‘right’ and will lead to long-term financial success.
CEO, Basware Corporation
Uncertainty is a significant contributor to low confidence. Psychologically speaking, if you don’t know or understand what’s in front of you, it’s very hard to commit to it. If a tendency for short term approaches stems from a lack of confidence, the solution must be to boost ‘certainty’.
How to achieve certainty? In the specific instance of business commerce, having visibility of all financial processes is a huge first step. See what’s going on, analyse the impact of it and make decisions appropriately. When this is backed up by reliable financing tools that can assist in balancing and stabilising cashflow at times of uncertainty, you can have more confidence in your ability to achieve financial success.
Once you have this confidence and can stabilise your financial situation, you even start to invest in your own processes. Meaning you can become more flexible and agile in your commercial transactions, so you can get a healthy return from working your capital within the supply chain. For instance, you could secure more early payment discounts by looking at future cashflow and identifying capital that can be parted with before the scheduled payment date. The benefit is that while you are parting with cash, you retain more working capital in the long run.
Alternatively, as a supplier yourself, you can investigate financing options to release more capital from your contracts. This is another calculation that can be made by seeing the whole picture of your financial transactions. When the conditions are right, it means more investment, more growth and a stronger business commerce ecosystem. The yield from some of these investments are often at a much higher rate than traditional options.
Every business that can reel in control of its own processes, costs and decision making can find the financial supply chain is an area of opportunity. A strong cashflow is not just a sign of stability, but also the bedrock for capitalising on these opportunities. There are some short-term gains out there that shouldn’t be ignored – they allow for agility and investment. But they should not be taken outside of the longer term picture. Forecasting more than a month or two down the line can nail down the financial security of your company for years to come.