A time to be thankful?

There is no end in sight to the current pandemic and it is likely that our lives will be affected by it until a vaccine is found. This means that planning is particularly difficult. Our world of certainties has been destroyed.

In truth, the certainty we think we can rely on in life is often just an illusion. Whilst we can control how we react to the issues we have to face in our personal and business lives, and the decisions we make along our journey, we have very little control over the world around us.

The pandemic has reminded us that the big things that affect our lives are out of our control. We can do our part in ensuring we do not get, and then pass on, COVID-19. We can try to reduce our impact on the planet by reducing the rubbish we produce and the emissions we are responsible for. But at the end of the day our impact will always be minute.

It is because of the enormous impact our environment has on our lives that we are in a very lucky situation.

We are incredibly lucky to live in a wealthy country that is relatively unaffected by blights and famines. Our economy, despite the hammering it has taken in the last few months, is still pretty strong when compared to many other countries’.

Even the weather, that we love to complain about, is pretty tame – no hurricanes and tornados for us. Although global warming has meant that some coastal residents have lost houses, the vast majority of us can be confident that the homes we live in will survive us.

Like our European neighbours we live in a politically stable country where the impacts of any election on our day to day lives is pretty minimal. We are highly unlikely to have to live under a military dictatorship where we could lose our lives, or loved ones, at any moment.

And yet the news is full of how badly off we are as a nation. Politicians play on peoples fears that we are being swamped by immigrants who will take our jobs and diminish our lives.

The fact is that the reason refugees want to come here is that they have sussed something that we often forget – this is a pretty great country to live in.

We are all incredibly lucky and have much to be grateful for – we just need to remember that fact!

Understanding your finances

In these uncertain times it is more important than ever for business owners to have a clear grasp of their financial situation. With the end of government aid in the form of the furlough scheme it might be that further cash flow support is needed to ensure employees can be kept on or it might be that ramping up after lockdown has meant a big investment in stock.

Whatever your circumstances you need to be aware of your finances so that you can make the right decisions for your business.

However, many owners/managers of small businesses (and larger ones for that matter) struggle to understand their business finances. This lack of understanding can make it very difficult for them to make the right decisions for their business.

Now, I am sure my accounting colleagues would not mind me saying that, most accountants make lousy entrepreneurs. We just lack the creativity and drive which makes entrepreneurs so effective at getting new business ideas off the ground.

So why should entrepreneurs/business owners be great accountants?

Each role requires an entirely different skill set and way of working and, indeed, a different personality type (if you are familiar with DISC profiling). So don’t be shy about admitting that you are struggling with the money side of your business.

Many business owners do not seek the proper help and guidance, or have the right level of financial information, to help them make decision.  To me this is a huge mistake which can lead directly to business failure. As a responsible business owner/entrepreneur you do not need to be a trained accountant but you do need to have enough knowledge of financial issues to run your business effectively.

So what do you need to do to get this knowledge? Well, for starters:

  1. Ask lots of questions of your accountant about why the figures are as they are.
  2. If you only receive figures from your accountant once a year, several months after the year has finished, this is not enough! You need to have regularly updated financial information to make decisions on a timely manner.
  3. Have a properly thought through profit and loss and cash flow forecast so you can manage your cash – and make sure it is regularly updated for what has actually happened.
  4. Don’t just be happy with knowing how much you have sold in total and the margin on this total figure. Ask how you can get information on individual customers, products and projects so you are clear which activities are profitable – and which not.

It is not good enough these days to just shrug and say “Well, I am just not good with figures”. You started your business to make a living for yourself, and any staff you have, and you owe it to yourself, and them, to have a good handle on the money in your business. Indeed in challenging times just surviving can take over as the overriding short term goal.

To help you I have written “your guide to understanding business finances” which can be downloaded for free from my website www.fionabevanfinancialmanagment.co.uk

Good Luck

Fiona:)