How well do you understand all of the financial things about your business?
Because let’s be honest, unless you’re an accountant or a bookkeeper, the vast majority of us didn’t go into business because we love accounts and numbers and spreadsheets and finances and things. And actually for a lot of us, they leave us completely cold.
But the truth of the matter is that for you to grow a business, it’s absolutely crucial that you understand the numbers; you understand your financial obligations; and you understand how to use all of that to help you grow a business, rather than find yourself in a bit of a financial pickle somewhere down the line.
But it’s difficult, isn’t it?
Because unless you’ve had some training in this area or unless somebody has in some way taught you this stuff, how do you even know what you are supposed to know?
So I want to share with you four key but really simple things that you can put in place in your business that will really help you in this area without you having to be a financial guru or having to spend a bazillion hours every single week pouring over some mind-numbing spreadsheets. So, here we go…
Know your monthly costs
Number one is to get really clear about exactly how much it costs to run your business every month. Not just a wing and a prayer, don’t just take a guess at this, but also it doesn’t have to be super complicated.
If you were to go back to your bank statements for the last three months, you could get yourself a pretty solid idea of how much it consistently costs to run your business every month.
So, that gives you your foundation level information. You know exactly what you’ve got to bring in each month to pay the bills. That’s step one.
Create an annual cash calendar
Step two is to create for yourself an annual cash plan. Again, this doesn’t have to be a bells and whistles, all singing all dancing spreadsheet or anything complicated.
All you need to know is your key financial obligations throughout the year. Do you have to submit accounts to Companies House? Do you have quarterly VAT returns? Which months are your end of quarter? When do you have to pay your tax? Do you need to pay personal tax? Do you need to pay corporation tax?
I know that might sound complicated, but the answers for you are probably all tied up with less than six facts or six key dates throughout the year or something like that.
So you can keep this really simple, but what you’re looking for is clarity because that clarity gives you control. So an annual cash plan will really help you.
Work with your accountant
Now, the third tip, which sounds ridiculously simple but often it’s harder than you think, is to make sure that you develop a really good working relationship with your accountant.
Your accountant is a crucial partner in helping you to grow your business.
But, unfortunately, a lot of accountants out there just want to tick the boxes, put the returns in on the right dates, and then leave you to it, whereas actually a good accountant will help you to really understand the numbers and get a solid grasp of how to use them to grow the business.
The crucial thing in terms of that relationship with your accountant is never to be afraid to admit the things that you don’t know.
An accountant is not going to assume that you have any level of financial knowledge, and he or she is not going to think that you’re stupid for not understanding this stuff. But I know that a lot of people hold themselves back from asking questions of their accountant because they worry that they’re going to look stupid.
But you know what, that simply doesn’t matter. Put it out there. The accountant will have heard way worse, way more silly than whatever is going on in your head, but the more important thing is that you get that clarity. So don’t worry what you look like. So ask your questions and get that clarity.
Set a monthly income target
The fourth thing that you can do is set yourself a really clear income target every month and make it prominent. Make it visible.
Get it onto the home screen on your phone, on your laptop, on your iPad, onto your screensaver. Get it up on your office. Pin it up somewhere you’re going to consistently see it,
And make sure that that target is a growth target, not just a target that will help you cover the bills each month. You need to set targets that are going to help you consistently grow your business month on month, so you don’t get drawn into the bread and butter work or dragged into a hand to mouth existence of just paying the bills every month.
Set a target that makes sure you get to the point of having a good nest egg, a solid buffer in the business, so that you don’t need to worry about finances each month.
And you know, the ironic thing is that the more you focus on your finances, the more that healthy finances will come to you.
So, those are my four key tips to help you get a grip on your business’ finances.
Be clear about how much money it costs you to run your business every month. Have an annual plan of all the key dates for incomings and outgoings. Develop a really good relationship with your accountant; and set an income target that’s going to help you to grow each and every month.
Hopefully that’s helpful for you. I would love to hear your comments in the section below, or if you know of somebody else out there who perhaps does not have the financial control in their business that they really need, then please feel free to share this with them.