Fiscal Responsiblity Is Old Fashioned But Necessary

Abundance of VC funding in the not-so-distant past created an environment where money felt cheap and growth (any type of growth) was valued so much that any problem was solved by throwing money at it:

• Problem: Not growing fast enough?

  • Easy Solution: Hire more people! (that can be counted as growth)

• Problem: Not meeting sales targets?

  • Easy Solution: Dump money on ads and hire more sales people! (ignore the added cost)

• Problem: Product development was slow?

  • Easy Solution: Hire more developers! (surely, more people doing the same thing will make it go faster)

And my favorite: newly hired executive not bringing results? Hire them a bigger team to help them do their job! I literally had a client CEO tell me that their VP of Sales (who hasn't made a single sale after being on the job for a year) was complaining that he has too much to do and needs an assistant.

It is true than in order to achieve almost anything in business, you have to allocate resources and spend money! Analyzing the problem as quickly as possible, identifying the necessary resources and money needed (and not a dime more!) are the street signs of fiscal responsibility at work.

The norm was to throw money at any problem without much regard to its root causes or most efficient ways of solving it. But with the slow-down of VC funding to anything but hot AI startups, I am hopeful that the old fashioned ways of Fiscal Responsibility will return and become cool again!

What is Fiscal Responsibility

It's a business culture above all. It's a combination of business policies and process to allocate money across the business functions in a conservative way that still achieves business objectives. It doesn't mean being cheap or never spending money - it means that before you spend money, you have done the homework on why the amount you're looking to spend is the right amount to solve the problem. Most importantly, if there is no problem now (or expected to arise out of inaction), then there is no spending.

How Do I Know If Fiscal Responsiblity is Present in My Business?

Here are just a few signs it's likely not:

• No Financial Policies

• No budgeting process or variance analysis in place

• Uncontrollable increase in spending month over month

• No controls over or many people have access to credit cards or bank account

• No controls over or many people have executive power to hire, initiate spending, or sign contracts

• No tracking or reporting of expenses (normally by a finance team or accountant)

• When there is no formal way to put in a request for spending, other than a basic email

• Spend requests are evaluated on the basis of "gut feel"

How Do I Deploy Fiscal Responsibility In My Business?

• Develop Budgeting and Resources Allocation Process and train the team on it

• Develop Spend Requsition Process and Train the team on it

• Introduce controls over access to credit cards, bank accounts, and financial software that provides ability to spend money

• Write Financial Policies and train the team on parts relevant to them (and have the sign them)

• Introduce controls over executive power to hire, sign contracts, and initieate spending

• Introduce SOPs and pre-defined templates for spend requisition

• Introduce periodic reviews of spending items like software and services primarily focused on utility, peformance and value delivered to business

• Introduce team performance management cycles that are based on:

  • 1) Setting Expectations at the beginning of the management cycle

  • 2) Tracking Performance throughout the management cycle

  • 3) Evaluting Performance at the end of the management cycle

  • Most faulty performance management programs (often designed by HR teams) are often solely based on evaluating performance without setting expectations and tracking performance

  • This will allow the business to identify underperforming team members and either reassign them or replace them (some people need to be fired even if they're nice - businesses are not charities)

or you can call Upward Insights and we'll help you build it all and deploy it!!