What Is Financial Excellence and How Do I Use It in a Business?

Financial Excellence is not about becoming better at accounting. It’s about using your financials to make better decisions, build a stronger business and create more freedom for the future.

By Jonathan Mond  |  6 min read

One of the things I often say to business owners is that your financials should tell you a story. But for many businesses, they don’t. They get a set of accounts every month, they look at revenue and profit, they check how much cash is in the bank and then they move on.

For me, that misses the real opportunity. Financial Excellence is about taking those numbers and turning them into information that helps you make better decisions about cash, profit and ultimately the value of your business. And you don’t need to be a CFO to do it. You just need to know what questions to ask.

The goal isn’t more financial information. The goal is better financial decisions.

Understand your Profit Story

The first place I normally start with a business is profit. But not simply, did we make a profit. I want to understand the story behind that profit.

What happened to revenue? What happened to gross margin? Are overheads growing faster than the business? Are we becoming more productive as we grow? And if sales increased significantly, did profit increase with them?

These are simple questions, but they start a very different conversation. Because two businesses can have exactly the same revenue and produce completely different financial outcomes. The numbers tell us what happened. Financial Excellence is about understanding why it happened and what we can do about it.

Follow the Cash Journey

This is where things get interesting. One of the most common conversations I have with CEOs is, we’re profitable, so where is all the cash? The answer is often sitting right in front of them. It’s just not sitting in the bank account.

Money lives outside the bank account. It can be sitting in receivables, inventory or work in progress. It can be tied up in the time between paying suppliers, doing the work, invoicing the customer and finally collecting the cash. Once we map out that journey and put days against each stage, people start seeing their business differently. Growth can actually make this problem bigger. You can be selling more, making more profit and still have less cash.

Use the Power of One

This is probably my favourite part. Once we understand the financial story, I want to know what would happen if we improved just one thing. Not ten things. One.

What happens if we increase price by 1 per cent? What happens if we sell 1 per cent more volume? What happens if we improve gross margin by 1 per cent? What happens if customers pay us one day faster? What happens if we hold one less day of inventory?

Suddenly the financials stop being historical. They become a decision-making tool. Every business has different levers and some levers are significantly more powerful than others. That’s the point. We can stop guessing and start seeing exactly where the opportunities are.

It’s a team effort

I don’t believe Financial Excellence should live with the CFO, accountant or finance manager. Of course, they play an important role. But the people making operational decisions every day are often the people influencing the numbers. Sales affects price and payment terms. Operations affects productivity, inventory and work in progress. Purchasing affects supplier terms. Leadership affects overheads and investment. Everyone affects cash. So when I work with leadership teams, I want them to understand the financial impact of the decisions they make. Not at an accounting level. At a business level.

Cash, Profit and Value

Ultimately, Financial Excellence comes down to three things. Do we understand where our cash is tied up and what is driving our cash requirements? Do we understand what is really driving profitability and which levers can improve it? Are the decisions we are making today building a stronger and more valuable business for tomorrow?

So, what is Financial Excellence?

For me, Financial Excellence is about understanding the financial story of your business well enough to make better decisions. Understand your Profit Story. Follow your Cash Journey. Know your Power of One. Then use that information to improve cash, profit and value. That’s Financial Excellence.

By Jonathan Mond
Global Scaling Up Coach and Speaker