What’s the balance in your business current account right now? Can you tell me? I hope you can – and right down to the very last penny too! Being aware of budgets, payments in, bills out and the state of your finances is a vital part of being in business and if you don’t know, for whatever reason, then you’re heading for trouble.
Let’s get excuses out of the way:
- Someone else does it
- I don’t understand numbers
- I’m too busy with everything else
- It looks after itself
If you’re planning on success – ignoring it, or delegating someone else to do it – is simply not going to work.
You need to understand your finances.
Yes, I know all too well that as an entrepreneur you have far too much to do, but money is the bottom line and you need to understand it. If you have been keeping your head in the sand in relation to the state of your company’s finances, then it’s time to shake the sand from your hair and pay attention.
Don’t understand? Find someone who does!
Every business needs a shrewd money-manager who understands figures. If you don’t have one on board, or access to one you trust, then it’s imperative that you find yourself a good accountant. Once you have found one, make sure you talk through your finances, and the financial state of your business, to make sure you understand it.
Business requires positive cash flow
It doesn’t matter what area of business you are in, or how profitable it is, if you run out of cash, your business will struggle to carry on. It could be completely disastrous for you – this is why cash flow eneds to be monitored at every stage of growth. If you are going through a rough patch you need to keep an even closer eye on money. You always need to be careful if your business is doing very well, there is still a danger of running out of cash through over-trading.
Keep a spreadsheet system
This is very easy to organise and simple to update regularly. If you do – you will quickly see the impact and knock-on effect of an unforeseen cost to the whole business. You will also be able to anticipate problems before the happen. Established businesses can spot trends such as escalating costs by checking past performances. This is a cost effective way of keep an eye on your company’s incomings and outgoing. You will reap the benefits down the line.
Searching for funding?
Perhaps you find yourself coming to a stage where you are searching for funding from potential investors. You will impress by showing extensive knowledge about how certain strategies will affect your financial position. Contestants on Dragon’s Den frequently show an embarrassing ineptness towards money – and this frequently loses them potential investment. I certainly wouldn’t lend money to someone who didn’t understand budgets, pricing or margins – and neither would you.
For my own company, Diva Cosmetics, I reviewed costs regularly, and I always knew the exact state of my company’s finances. This consistent and unwavering approach to my finances was a key player in the success of my business. For me, cash flow was a priority, so I always kept an eye on the bank balance.
My final tip:
Make sure you always keep an eye on money and understand finances even if you need to rely on an accountant to help. The only time your head should be near sand is when you’re lying down on it, on an exotic beach somewhere. With a keen eye to your finances – you should soon be earning enough profit to be able to afford it!