What’s the balance in your business current account? Can you tell me? I hope you can and right down to the 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 the excuses out of the way. There are so many to choose from of course… someone else does it, you don’t understand the numbers, you’re too busy with everything else you have to do, or even it looks after itself! But delegating to someone else in order to forget it, or ignoring it, is simply not going to work if you’re planning for success.
Yes, as an entrepreneur, you’ve got far too much to do, but money’s the bottom line and you need to understand it – adopting a head-in-the-sand approach is not viable. But if you are that type, it’s time to shake the sand from your hair and pay attention. A detailed approach to money is essential – not just in relation to the bank balances as they stand today, but with regards to your cashflow position now and in the next three months.
An accountant’s role is unquestioningly vital in every business – and they are outstanding at providing historical information – as business owners, we need to focus on where we are now and where we are going to be. Only by watching the figures will you be in control of your finances. If only more business owners recognised when their sales income started to dip and cashflow was not so good, they could take steps to minimise the effects. It’s important to have in place a set of tools that will allow you to spot these telling gaps in your finances, before they cause problems.
Having a spreadsheet you can refer to – which is easy to organise and to update regularly – you will be able to see at a glance, the impact and knock-on effect of an unforeseen cost to the whole business. You will be able to anticipate problems before they happen. In new businesses you will see areas of incorrect budgeting and the effects of delays. For established businesses, you will spot trends such as escalating costs and be able to check past performance.
If you’re at the stage of searching for funding, whether for start-up or for expansion, you will need to demonstrate to would-be investors that you understand your financial position and the effect that certain strategies will have on it. Please don’t be like some Dragons’ Den contestants who fumble over figures and stall their own progress because all they show is an embarrassing ineptness towards money. Would you lend your cash to someone who didn’t understand budgets, pricing or margins (or whose performance made you cringe like that)? Exactly… and neither would I.
My tip is to make sure you always keep an eye on money and understand your finances – I believe the only time your head should be near sand is when you’re lying down on it, on an exotic beach somewhere.
Emma Wimhurst is the author of BOOM! 7 Disciplines to CONTROL, GROW and ADD IMPACT to Your Business.