Accounting and bookkeeping services in Hyderabad > Blog > Cost Mangement > How to Instill Financial Discipline into Your Leadership Team

Money is the lifeline of an entity. Using the available finances/funds carefully and wisely by having a proper account of the inflows and outflows is highly important for any business to thrive.

A. What is financial discipline?

To put it simply it is taking control of the money and channeling the spending towards the monetary goals set through various financial planning. It takes patience and dedication for one to be financially disciplined as it’s no skill but through practice, it can be an acquired talent.

B. Why is it important that the leadership team understands the importance of a financial plan and remains disciplined?

The leadership team is responsible for all the important decisions which can either make or break a company. To achieve long-term goals and to drive strategies for driving growth the leadership team must be well aware of the financial position; is fully able to assimilate the financial plan and manage the finances by making only purposeful spending which is all accountable.

C. So how does one become a financially disciplined leader?

A disciplined leader creates healthy habits at the interpersonal and organizational level. This checklist can be a powerful tool that ultimately creates the financial discipline required.


1. Personal level:

 Understand the business and business cycles:

Every business has a period of highs and a period of lows. The expenses and savings should be planned in a way to suit such a business cycle. The leadership team should be made competent to forecast such cycles.

Know the economics

An understanding of the market is highly essential as the companies function in tandem with the market moods and movements.

Know the leadership principles:

A leader should be aware of the style of leadership one follows or must follow to ensure that the financial discipline remains intact.

2. Organizational level:

Improve decision making

Consider taking decisions by factoring in all the elements internal and external and try to assess the impact of the decision at all levels of the organization. Analyze the alternatives for cost-benefit before deciding.

  Develop a short-term and long-term goal with well laid-out strategy and financial plan

Though it sounds basic, most organizations do not have a strategy. A strategy should spell out the value that you bring.

Have financial plans in place before execution and at regular intervals analyze the variance between actuals and budget to take appropriate corrective actions if required

  Understand, review and analyze the financial activity of the entity
  1. Review and revisit and re-discuss the huge expense
  2. Regularly review the cashflows
  3. Build appropriate forecasts and verify the suitability of estimates used
  4. Ensure financial discipline is working in tandem with business discipline
Review the requirement of people to the company

Employees should always be an asset to the company and not an expense. The leadership team should assess the requirement of the right quality and the right number and take appropriate actions.

Spend below budget

The leadership team should consider the company’s money as their own t’s advice that seems simple enough, but many companies fall into the trap of spending more than their budgets allow—and falling short when unforeseen circumstances occur.

it’s wise to work on your allocation so you have a cash reserve when you need it. The leadership team should be analyzing your company’s actual spend and tidying up the budget on a regular interval to ensure your business is consistently spending below budget.

Identify and communicate

Every leader should identify and communicate with the subordinates promptly about their expectations. This step alone will reduce a myriad of frustrations.

As they say, “We are what we do repeatedly”. Likewise – financial discipline is not an act but a habit. It is not something that is taught to the leaders in any school. It is more of an art than a science.

Leading without financial discipline can only work in the short term. Adding financial discipline to your organization through leadership will reduce the level of stress and anxiety and improve the overall health of the organization.

Our country has witnessed many huge corporates closing or liquidating due to financial indiscipline. Eg: Kingfisher Airlines, Sathyam, etc. The finance is not an open resource and cannot be dug out at will any time. If the finances are not utilized with wisdom, then the objectives would be plunged and the credibility would be lost. This closes all the doors for future fiscal appropriations and sanctions

Financial discipline thought is continuously evolving and encompassing more dimensions that have emerged relevant now! It is an open-ended turf and the significance of it is driving the innovative practices that find acceptance as the standards of fiscal prudence in business decision making. Enterprises and firms in all verticals know that fiscal discipline is vital not only for their profits but also for their viability as a competitive entity in the marketplace.

What is Diligen’s role? How does it help instill financial discipline?

Diligen is a corporate service provider with a belief to deliver quality services and a goal to retain customer confidence and satisfaction. Diligen functions with a team of experts who coordinate with the clients and help in the careful allocation of resources with minimal wastage. It helps save costs and helps businesses understand the importance of financial discipline through their various responsive and customer support services.

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