I think we can all agree that our business finances are one of the most intimidating parts of running a business. My clients often share that their biggest fear is that a bad financial decision could be disastrous for the business.
So, why then do we always put it in the too-hard basket? Is it because we are truly scared of what we don’t know or because we worry we’ll lose our credibility as business owners if we just don’t get it?
Many business owners focus on what they are passionate about and will usually skip over the big picture. They are either too busy or don’t have the inclination or the education to understand what the numbers mean.
Remember, sound business decisions are made when we consider our financial goals and understand how the decision will affect the business in the short term and long term. When you understand what the financial side of your business looks like, you can develop an understanding of trends, form insights, and make smart decisions – instead of feeling like you’re having a stab in the dark.
What is the “right” way when it comes to our business dollars? Like most things, financial literacy can be developed – with practice. I’m happy to show you the “right” way to make sense of your business dollars.
“You can’t go back and change the beginning, but you can start where you are and change the ending”
Without using scare tactics, many sources will quote that the underlying reasons for a small business not surviving are mostly financial. The good news is that I promise you don’t need a finance degree to grow a financially successful business.
Over the last two decades (please don’t calculate my age), I have worked with businesses across many different industries and of all sizes. Two of the most common mistakes I see small business owners making are;
Have I managed to hit one of your pain points? When it comes to your numbers, the saying “failing to plan is planning to fail” rings true. The numbers are important because they tell you the story of your business through the past, present, and future.
Don’t despair; you don’t need to be an accountant but knowing the numbers is essential to working smarter in your business. So here are my Top 3 numbers you should be paying attention to.
In my own business, these are the three numbers I look at on a weekly basis to see how my business is tracking.
Don’t mistake profit for cash. Cash flow is an important metric that keeps all businesses operational. Compared to the budget, you will have real-time insights into how your business is truly tracking and can make business decisions confidently.
While it may be beneficial to budget your revenue and expenses, cash flow planning is where the “money” is. A well-prepared cash flow budget will allow you the foresight of when the speed humps may be coming. This is especially important for seasonal businesses.
This is the total amount of money that comes into the business and from all income streams. Take the time to review your revenue and revenue streams and how they are tracking compared to your budget, and it is important to understand why. This is where you become proactive with your financial future.
If revenue is lower than budget, you can make immediate decisions immediately and decide how to rectify this in the coming months instead of turning a blind eye. Conversely, if revenue is higher than budget, it may present an opportunity for further growth.
Last but by no means the least important is how much you actually pay yourself. When it comes to paying themselves from their business income, an unfortunate majority of small business owners forgo a wage or salary, preferring to simply take what they need from the business. The reasons for this can include fear of draining the business funds or lack of understanding of the best way to remunerate themselves.
I’ve developed an online training program to help you and the many many women who are in the same shoes. The Financially Fit Women program is perfect for anyone who:
Can’t wait for the course to begin, or just want to get someone to help now? No problem – drop me a line, and we’ll work out together what the best support option will be for you.
I gotcha sweetheart!