“Seemingly small decisions left unchecked over time can take you off track and possibly over the edge.”
I love this quote from entrepreneur James Ashford. It really highlights the importance of paying attention to the details of your finances.
In life, it’s easy to focus on the big milestones and gloss over the small, seemingly insignificant happenings. But this is often a bad idea, especially when it comes to managing your business.
Let’s take the example of a dripping tap in your house. The drip is slow. It’s not causing any inconvenience, it’s not damaging anything – there’s nothing more than a wet sink to deal with. You don’t have the time to fix it, so you leave it dripping.
How bad can it be?
If you are lucky, you get an unpleasant shock when your monthly water bill arrives. If you are on tank water, you may not realise just how much you’re losing until the water has run out completely! Those gradual, steady drips have added up to litres of water literally down the drain every day.
This is what can happen if you don’t monitor your numbers and keep track of those leaks and drips. Those seemingly irrelevant amounts can end up making a significant difference to your cash flow.
What Numbers Do You Need To Know?
I understand that you don’t have oodles of time to spend perusing every possible aspect of your business financing. Luckily, you don’t have to.
The trick to understanding your numbers is knowing which ones are the most vital to your business; which ones can signal problems that may need a deeper dive.
Here are some of the most vital questions you should always be able to answer using your financial reports:
- What is my breakeven point?
- What is the minimum number of sales I need to make every week/month?
- Am I going to run out of money? If so, when?
- How much should I put aside for tax?
If you don’t know the answer to these most fundamental questions, you are playing pin the tail on the donkey with your business finances, and that is unlikely to end well!
So, we have established what you need to know. But how exactly do you find the answers to these questions?
Create A Budget And Check Your Progress Regularly!
Yes, the dreaded “B” word – many people fear it, but if you think of it less as a restrictive ball and chain and more as an evolving roadmap, you will appreciate how much it can help grow your business.
The key word here is “evolving.” A budget is never set in stone, and is only as effective as how you use it.
Your budget should be unique to your own business. It should not be a template that you have downloaded from the internet! It means doing some homework into how things are going in your business, examining your incomings and outgoings, and looking at sustainable and practical ways to handle your finances.
That can all be hard to tackle, so it is helpful to have a great accountant on your team to make sense of the story your numbers are telling you.
Roll with the changes.
To make sure you stay on track, you're going to need to make continual adjustments. An unexpected bill, a delayed shipment, or a big new project all have the potential to take you off course. But if you are aware of what that means for your business, it doesn't have to take you over the edge.
The key is to set clear, achievable goals, undertake regular management reporting, review your progress, and get professional help from someone who knows exactly how to understand the unique numbers for your business.
Management reporting includes cash flow statements, profit and loss reports, balance sheets, and more in-depth reviews to draw out the information that tells the story of your business.
Your accountant can help you create all of these specific reports and also educate you on how you can use these reports in your budgeting.
Having all of the information is only one part of the puzzle. It's how you respond and adjust which will make the difference. You might need to hire more staff, increase your marketing activity or review prices. Watch your money coming in as well as the money going out and plug the “leaking tap” gaps.
Making Big Dreams And Plans A Reality
If you have big dreams and plans, having a great accountant on your side can help you to achieve them.
And if you still don't believe an accountant can do more than tax returns, perhaps my clients can change your mind...they tell me I help by:
✔️ Mapping out the next steps to turn ideas into reality.
✔️ Arming them with information to make the decisions with confidence.
✔️ Cutting straight through to what matters and helping focus on the key things that make the most difference.
✔️ Explaining finances in a way that doesn't make them feel foolish.
✔️ Being a safety net so they can make bold business decisions knowing I'm there to catch them.
Sound like the kind of accountant you could use in your team? Then book a free 15-minute discovery call with me, and let’s talk about how I can help you get to where you want to go.