In Portugal, the practice observed regarding the financial management of companies continues to be marked, in my opinion, by questionable principles that largely justify why we can’t see the great professional talent that, I believe, Portugal really has, reflected in the quality and sustainability of companies more often.
Highlight the most blatant problems, I can list the 10 principles crearly:
- Mistrust of venture capital and other equity instruments and a tendency towards excessive bank leverage. Going public implies giving up some control and profitability to shareholders, but excessive dependence on banks also has close implications, deepening the company’s risk. Facing venture capital as a serious hypothesis is an interesting scenario, especially when we have a project that we cannot carry out without financial “muscle”.
- The way of understanding the community support and incentives, starting from the incentive to the idea, instead of starting from the idea to the incentive. Incentives exist to support ideas that make sense, with or without incentives.
- Endemic combination of micro-management with lack of reporting on essential data. To a large extent, because there is no discussion of what essential data are.
- Wrong billing and credit control practices, as if payments were not, for a company, the equivalent of a human being’s breath.
- Negotiation with suppliers is almost always based on price, forgetting other criteria as important, if not more important.
- Payment to suppliers is based on whoever complains the most.
- Aversion to technology and to what it can do for a financial function: automating, improving the timeliness of processes, reinforcing the reliability of outcomes.
- Excessive intuition and emotional attachment, lacking objective data and ignoring evidence. Which leads to betting on the wrong horses and continuing to throw money at them when it is already clear that the race is going to be lost.
- Chronic lack of training in basic things like Excel, financial calculation or other topics.
- In contrast to all the above, running a company as if the finance function were its raison d’être, instead of the customers, shareholders and employees.
There could be others, but maybe these are the Top 10 of a reality observed over 25 years.
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