On November 1st we talked about accounting as the “language of business”. Now we focus on the several audiences, how they differ and why they are important. Regardless of the form of your business, you undoubtedly have several of the audience members shown on the nearby slide. I covered the first three in my post of November 8th. Let’s review the last three:
4. Your Key Vendors: Many companies, particularly manufacturers and wholesale distributors, require substantial lines of unsecured (“open account”) credit primarily to support purchases of raw or finished goods inventory, often with trade terms extended beyond the norm. This can be in addition to or in lieu of the banks. If this is critical to your success, the several vendors should be viewed much like the banks in terms of information provided.
5. Your Employees: Some companies subscribe to the theory that if informed of company financial condition and performance (“Open Book”), all employees are empowered to perform better, and to be more committed to the company and its success. I have mixed beliefs about this, leaning toward sharing limited but key information with a select group of managers, but not necessarily all employees. I think the results depend heavily on the size and complexity of the business, the number and levels of employee education, etc.
6. Strategic Partners: Many companies, particularly when in early to mid-stage growth, often in the tech-sectors, seek out and engage such partners who have a financial incentive to see the junior partner succeed. The common interest can usually be found in product development, marketing, complimentary products, licensing of intellectual property, etc. These relationships can be informal, but are usually contractual over several years, including financial performance benchmarks for both parties, and can even involve shared ownership. The word “partner” is often bandied about in the business world I think, particularly in normal vendor – buyer relationships. When confronted with that by vendors, as a “literal-minded Kentuckian” I would respond, “You know, I looked that up the other night, and it said “Joined in equity to share risk of profit or loss.” I would then ask where and when they wanted to kick in the equity part. We would not hear much “partner” talk after that.
Douglas K. Steele