Understanding the finances in your company is important for any small business owner – regardless if you’re a ‘numbers person’ or not. I’m not a natural ‘numbers’ person but I’ve trained myself to be on top of this very important aspect of doing business. In fact, I’m very passionate about supporting small businesses to succeed financially. The Australian Businesswomen’s Network’s Small Business Finance Course is designed to give small business owners the skills to properly manage their finances.
Below are five reasons to better understand the fundamentals of your finances:
- It’s how you know if you’re successful. While monetary success is only one measure one measure in business, it’s an important one. A big part of your small business being successful is being financially successful. If you don’t fully understand your business’s finances, you may not be able to tell how you are REALLY fairing. Up to date bookkeeping means you won’t have any nasty surprises.
- It can help you identify what’s working and what isn’t. Knowing which products and services are working and which are draining your time and energy means that you can knowingly choose to ditch a problematic service and power up an area where your strengths lay. As a small business owner, you need to understand what you’re doing right and what you need to work on and watching the numbers can help you do that.
- It’s essential when growing your small business. It’s safe to assume most business owners would like to, one day, expand their business. You won’t be able to know if your business is in a position to expand unless you know the state of its finances. Up to date figures and sound budgets and forecasts allow you to make sound decisions about growth – developing new services, hiring new staff, investing in technology etc.
- The buck stops with you. As a small business owner, you need to know everything that is happening in your company. You don’t have to DO everything (and I recommend that you use a professional bookkeeping service and an accountant), though. The bottom line and whether you profit or not, is your responsibility so don’t bury your head in the sand. Ask for help if you don’t know how to manage your finances – whether that’s producing income, getting better terms with suppliers, having clients pay faster or simply budgeting and forecasting your cash flow.
- Knowing the facts means you can make changes. It doesn’t really matter if you’re not currently making a profit. What matters is that you know the state of your finances and have a plan for making improvements.
As a small business owner, you should be able to answer simple questions about your finances. I get weekly financial reports to look at and monthly I take a deeper look at the company’s performance for the last month – and I can compare we did, to how we had budgeted. Regardless if we met budget or not, I know where we stand. I recommend that you develop the ability to understand and analyse the following: • Profits and loss statements • Cash flow projects and budgets • Income statement • Balance sheet Read through some of the tweets from Part Two of our recent Small Business Finance Course to see some advice from Karen Houghton, the CEO of Miss Money Pennys.
— SuziDafnis (@SuziDafnis) June 18, 2014
If you’re wanting to learn more about understanding and analysing your financial information, consider joining us in our next Small Business Finance Course. This course will introduce tools to simplify how you plan your finances.We also look at ways to manage your numbers and get them in line with your business goals. Join us and start implementing the key elements of financial planning into your business’s finances.