Making Better Business Decisions: Why Financial Leadership Matters for Your SMB
In our LEAD™ Masterclass this week, Malcolm Prowle, co-author of Developing Financial Leadership in Small-Medium Businesses with our CEO, Stewart Barnes, shared invaluable insights on making effective business decisions with a strong financial foundation.
Malcolm Prowle sharing his financial expertise with our LEAD™ delegates in their Masterclass
For those of us leading small-medium businesses (SMBs), his message was clear: financial leadership isn't just about number-crunching; it's about creating a culture where financial awareness drives better decisions at every level of your organisation.
The Daily Decision Dilemma
Every day in our businesses we face countless decisions. Some are strategic, like if we should expand into a new market. Others are operational, like which supplier we should choose, but what unites them all is this: the quality of our decisions depends entirely on the quality of information we have at our disposal.
Too often SMB leaders make decisions based on incomplete information. We might have excellent insights into our sales pipeline or operational challenges, but the financial dimension gets overlooked or arrives too late to be useful.
As Malcolm and Stewart emphasised in their book, and Malcolm reiterated it in his Masterclass, this creates a dangerous gap between what we think we know and what we actually know about our business.
Financial Inputs: The Missing Piece
The reality is that many business decisions in SMBs are often made without proper financial inputs. Sometimes the data isn't available and other times, it exists but isn't used effectively. Either way, the result is the same - decisions that might look good on paper but fail to account for financial risks and rewards.
Malcolm's Masterclass also highlighted how financial methods and tools can transform decision-making. But, and this is crucial, having the tools isn't enough. We need deliberate action to ensure financial inputs become integral to our decision-making processes. This is where financial leadership comes in.
What Financial Leadership Really Means
Financial leadership in an SMB goes far beyond having a competent finance director or keeping accurate books. It's about embedding financial awareness throughout your organisation, ensuring that everyone from the boardroom to the “shop floor” understands how their decisions impact the bottom line.
Crucially, this requires vision and leadership from the top. As owner-managers and senior leaders, we set the tone. If we consistently ask about financial implications, demand robust financial analysis before major decisions, and celebrate financially sound thinking, we create a culture where financial awareness becomes second nature.
Building a Financially Aware Culture
One of the key messages in the book is that financial leadership must permeate the entire organisation. This isn't about turning everyone into accountants, it's about ensuring that non-finance managers understand the financial consequences of their choices.
Think about your management team. Can your operations manager articulate how process improvements affect cash flow? Does your sales director understand the difference between revenue, gross profit and gross margin? Can your HR lead explain the full financial cost of recruitment decisions?
If the answer to any of these questions is "not really," you're not alone. Many SMBs struggle here. But the businesses that get this right - those that invest in developing financial literacy across their teams - make consistently better decisions and are better positioned for sustainable growth.
Jill Douglas, Malcolm Prowle and Stewart Barnes at the Developing Financial Leadership in Small-Medium Businesses book launch
The Strategic Dimension
Financial leadership becomes even more critical when we consider strategy. Two-thirds of businesses lack a business plan and even those with one often fail to ensure proper financial underpinning.
What became clear from hearing Malcolm and Stewart talk at the launch of their book in the summer was that effective business strategies require strong financial foundations. From strategic cost improvement and pricing strategy to capital investment appraisal and productivity enhancement.
The tools for productivity improvement, for example, are readily available. What's often missing isn't technical knowledge, but the vision and leadership to prioritise financial discipline in strategic thinking. This is particularly vital given the unique challenges SMBs face compared to larger organisations.
Taking Action: Where to Start
Following the LEAD™ Masterclass, here are practical steps to strengthen financial leadership in your organisation:
Start at the top. Board members and the CEO must model financial awareness and make it clear that financial considerations are non-negotiable in decision-making.
Invest in capability building. Your finance team should actively train and develop financial skills throughout the organisation. This isn't a cost, it's an investment in better decisions.
Create the right structures. Ensure that financial information is timely, relevant and accessible. Decision-makers need the right data at the right time, not a month-end report that arrives too late to be useful.
Make it cultural. Financial awareness should be woven into your company's DNA, and recognised, rewarded and reinforced at every opportunity.
The Bottom Line
As Malcolm and Stewart remind us, SMBs are the backbone of our economy. The “vital 5%” of companies that truly embrace growth and development - the entrepreneurial SMBs – disproportionally drive over a third of the country’s employment and wealth creation. But this success doesn't happen by accident.
Effective financial leadership is essential for survival and growth. It's about more than compliance or keeping the books straight. It's about creating an organisation where financial awareness enables better decisions, where leaders understand and manage risks and where everyone contributes to financial performance.
The future belongs to financially aware leaders; those who can and will take managed risks based on solid financial understanding. This week’s Masterclass was a powerful reminder that developing this capability isn't optional, it's essential for any SMB serious about sustainable success.
What will you do differently in your next business decision?
To hear more about the Developing Financial Leadership in Small-Medium Businesses book, you can catch the recording of Malcolm and Stewart’s book launch on our YouTube channel, where they were interviewed by Jill Douglas, sports presenter and business writer:
To read more about the book or to buy your copy, please click on the photo below
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