Keys to Improving Business Success

Question of the Month: Why is due diligence and transparency important?

Due diligence means you are collecting the proper information and ensuring you are aware of all the relevant facts. As the term transparency implies, it means there is a degree of openness and honesty. The recurring theme of October’s articles illustrate how important due diligence and transparency can be to business success.

Manage Your Business Banking Relationship

Part of financial due diligence in operating a business is having a financial representative (i.e. Owner, CFO, Controller, Business Manager) meet regularly with a bank representative. Prior to the meeting, create an agenda of topic areas. These should include things like:

• Future financial needs for expansions or acquisitions, like lines of credit or loans
• Best use of cash accounts like sweep accounts to maximize return and minimize expense
• Short and long term investment options for a practical liquidity tree
• Use of merchant accounts

Plus, in these times it may not be a bad idea to discuss the bank’s liquidity and financial stability, especially if you have money in non-insured accounts. Be prepared to ask questions that require details, not unresponsive platitudes. The bank sure doesn’t hesitate to grill you about your business when the money flows the other way.

Read more about managing business banking relationships;

Is Sarbanes-Oxley Improving Corporate Governance?

Again we find ourselves in middle of economic turbulence due in a large part to a lack of business ethics and sound business practices. Without the necessary transparency and due diligence, lies and deception can go unchallenged, particularly when people are being dishonest with themselves.

But wait a minute! Wasn’t Sarbanes-Oxley (SOX) supposed to put an end to all that? Aren’t public companies, financial or otherwise, supposed to have internal control systems in place as well as checks and balances to prevent unrealistic, overly optimistic projections and reporting? Obviously, though well-intentioned, SOX has not been as effective as it should be in preventing fraud, abuse, and intentional ignorance. Also, it apparently has not been successful at encouraging organizations to implement effective financial internal control systems and improve corporate governance.

Read more about whether SOX is improving corporate governance;

Managing Financial Strategy Means Business Success

A clear strategy and plan not only incorporates goals and the activities needed to reach these goals, but it also addresses risks. Obviously, the risk of handing out loans for hundreds of thousands of dollars without the proper due diligence and transparency was not accounted for in managing the financial strategies of those lending/financial organizations now failing or on the brink of failure.

Read more about Managing Financial Strategy;

On That Note;

Answer to this month’s question: Due diligence and transparency are important because being aware of the facts and avoiding deception (including deceiving yourself) can mean the difference between success and failure; between staying in business and going out of business. As the theme of this month’s articles point out, the current state of financial crises may have been avoided if those in charge of banks, lending institutions, regulatory offices, and even elected officials would have exercised appropriate due diligence and transparency.

Please feel free to contact us with any questions or comments. Also, please let us know if you’d like any specific topic addressed in our future articles.

Regards,
Chris
Bizmanualz

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Posted on Monday, October 27th, 2008 under Monthly Summary

Licensed under a Creative Commons Attribution 3.0 United States License.

Originally published by Bizmanualz, Inc. under the title Keys to Improving Business Success.

This and more articles like this can be found at www.bizmanualz.com. This article may be reprinted freely as long as this resource box is left intact.