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:
- Ask lots of questions of your accountant about why the figures are as they are.
- 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.
- 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.
- 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