Many companies lack a strategic approach to operations and finance management, as well as a service-oriented, modern, harmonious focus on comprehensive development and consideration of the interests of all parties while remaining customer-oriented. By prioritizing these goals, you can plan the transition to a new stage of personal and company development, identifying the essentials in the organization’s activities, and preparing for the future accordingly. This book will assist you in meeting these challenges.
Why is financial management necessary? I open this book with a seemingly paradoxical question. While the answer may appear self-evident, in practice it’s not always so.
I’ve encountered and continue to meet senior managers and entrepreneurs who genuinely believe that financial management isn’t crucial for building a successful company. This perspective is flawed. Many operate under the misconception that finding the right idea, crafting a business model, negotiating with counterparts and assembling an operational team negate the need for managing finances, at least during the initial years of a company’s existence and, often, not even in the first decade.
I’m convinced that this mindset is a relic of the post-Soviet management model. Those familiar with that bureaucratic system became exhausted by planning but never truly grasped the intricacies of sound financial calculation and organized budgeting. In that environment, where competition was scarce and profitability often obscured financial scrutiny, there was little impetus for implementing robust financial management: competition was absent, and the profitability was such that money was not counted. Additionally, the explosive economic growth and lack of competition in various sectors were periodically disrupted by crises and currency devaluations. The absence of crisis management experience hindered the development of economic planning habits and systematic financial management for most economists.
During the first two decades of Russia’s market economy development, profitability, often achieved through unofficial financial schemes and legal structures for tax optimization, served as the primary yardstick for financial management effectiveness. The ability to negotiate financing with banks and other financial institutions was deemed a critical skill for financial managers. Meanwhile, factors like the quality and depth of management accounting and reporting, effective liquidity management, internal process organization and automation, and the implementation of transparent internal control systems – parameters widely accepted as key indicators of financial director effectiveness in Europe and North America – were deemed inconsequential, and sometimes even detrimental, to the businesses grown on the former Soviet grounds.