You're Not At Home

Many a woman has lost credibility in the office by applying reasonable at-home financial rules to her company's operations. Corporate finance does not always operate like your household budget. It is not important that you know all the ins and outs of financial management, but it is necessary for you to remove your thinking from the way things are done at home. I offer a couple of examples.

I once worked for a firm that was almost a year behind in billing its new products. All new contracts were audited for mistakes. Because other priorities got in the way, the audits were a year behind. The customers who purchased the equipment had not kept track of whether it was billed and paid for, since that was the responsibility of their company's accounts payable department. The accounts payable staff had been taught not to call suppliers and beg for invoices. Customers' billing cycles passed, and the money was no longer available. When they finally received their bills, customers had to repeat the process of submitting the invoice and allocating the funds – hardly a process you want your customers to go through.

The women who processed these audits believed our customers would be happy to receive their bill a year late, since they had use of their money longer. These women persisted in applying at-home rules on the job, costing the company enormous amounts of money and damaging its reputation with customers.

As another example, housing is the single greatest expense for most families. Many find it is financially better to own a home than to rent. They can realize financial benefits each year by reducing their taxable income by the amount paid on interest, usually a sizable portion of the monthly mortgage payment. They can contribute a monthly amount toward owning. If they sell the house, they receive the equity built up through their own contributions as well as any increase in the value of the home. If they don't sell, at some point the mortgage is paid off and they can live in a home without a monthly payment to the bank.

In the corporate world, however, salaries and wages are usually the single greatest expense. Sometimes it makes sense to own a building for the same reasons we want to own a home, but often it makes more sense to lease a building. The needs of a growing company may change faster than the ability to sell and buy property. If you are a manufacturer, your needs for square footage and environmental considerations may change each time you introduce a new product line. If you tie up your cash buying a facility, then you might not have the capital to develop a new product line or acquire a competitor. If you spend all your resources on a building, you may not have the cash you need to get through some slow periods.

Theoretically, all decisions in business are based on what is financially best for the company in the long or short term. Even an extravagance such as fancy office furniture might be justified to impress potential clients or attract the right kind of employees. Too often, we think of office purchases in terms of what would make us happy, rather than what would make us more productive. The more we can think in financial terms, the more credibility we will have, and the more we can contribute at work.