This is one of the most common questions I’m asked.
My answer is plain and simple:
If you don’t have clarity on the numbers in your business…
How can you plan – both for your business and your personal life?
How do you know if there’s a problem?
How do you know you have enough for when the tax man comes knocking?
How do you know if what you’re doing, what you’re busting your guts for, is actually working?
Ultimately, how can you sleep at night…?
We understand that you may not be confident with financial numbers; you’re not running a bookkeeping business after all. And, it’s likely you find the numbers dull compared to some of the other aspects of running a business.
But if ignored, any ‘hidden’ issues won’t go away, the overwhelm will build, and you’ll eventually lose control of your business.
In a recent survey we ran, almost a third of business owners have little confidence with their finances right now. And 46% don’t fully understand them so rely on external professionals.
I am SO passionate about this that I’ve put together my top tips to help you. I know you can do this because in this same survey, almost 90% of business owners had a clear view of their personal finances, but only a little more than half had a clear view of their business finances.
#1 – Focus on what you want to be – NOT what you are
Don’t base decisions on where you are – base them on what you want to become. One of the first things I ask clients is what type of company they want to become – £1m a year turnover? £2m? £5m? £10m? You must have definite objectives. The decisions you make as a £200k-a-year business are different to one that turns over £10m. If you want to become a £10m business – start thinking like one.
#2 – Develop a Simple Financial Strategy:
This sounds grander than it is, but there are just three key areas to focus on:
- How quickly does £1 you spend in your business come back in?
- How much of that £1 is actually the businesses, and how much is it other people’s money e.g. HMRC, staff etc.
- What working capital do you need to grow your business, and how will this be funded?
#3 – Access Outside Expertise
Recruiting might not always be the answer. Often, it can be better to outsource your bookkeeping and accounts to ensure the best outcomes.
Free up your time so you don’t get caught up in day-to-day matters, when your time could be devoted to scaling your business. Stay focussed on the ‘big picture’. Operate at your pay grade.
But, this comes with a warning…read the next point carefully.
#4 – Manage your Bookkeeper / Accountant
I am horrified by the lack of care and attention by so many external professionals that we rely on for our finances. In fact, we have fired many of our clients’ providers.
(I know there are some good ones out there, and we’re very lucky to have found ours. It is simply life changing).
But YOU need to take accountability. Don’t just leave it up to them and assume they’re doing everything they should be.
Frustrations encountered with their bookkeepers cited in our survey included: lack of accuracy, little clarity, delays, conflicting advice, and simply “not knowing what’s mine”.
Set-out what you’re looking for them to do, what your expectations are, what set of information you’re expecting on a regular basis. And don’t forget to share what your values are.
Set regular calls and meetings to get up to date information and have the ability to be proactive and to talk through money. Connecting money to your business is essential.
Start asking questions and don’t stop until you have clarity and confidence in your finances.
If you’re using a business coach, then they MUST have strong financial expertise. Everything you are working on with them must ALWAYS come back to the numbers. If not, then how can you make decisions?
#5 – Set Alerts & Try to Predict the Future
The idea of having alerts or alarms operating within the business is that they are activated in real time.
It amazes me that most business owners, even lots of really sizeable companies, do not know how they are performing until their accountant presents them with a set of year-end figures. Often this can be 12 to18 months later than needed. How can you possibly deal with a problem that far in the past?
Having alerts provides a solution – simple numbers that help you to spot that something isn’t quite working. Then you can fix things or take evasive action. When things go wrong, often it’s because people haven’t recognised the signs, which can be evident months in advance.
Always stay very close to your finances, and measure your performance daily, because that will give you 261 opportunities a year to put things right, not just 12 times because you’re only measuring performance every month.
My Final Word…
Start getting EXCITED about your numbers and finances. They’ll give you all the answers you need – you just need to ask the right questions.
You can then start understanding where you are right now and then start planning what else you could be doing. Excited, right?
Finally…if you’re a partnership or family business, then please involve them. Discuss and agree your financial goals – both personally and for the business. See how they all connect. Hop on calls together. Share burdens. Celebrate success.
Ohh final, final word. SHARE THEM WITH THE TEAM. Business is a team game, so your team need to understand where you are so they can help you get to where you want to go. If not they are just passengers.