You live and breathe your business every day, and no one knows as much about it as you do. But are you neglecting one of the most important things about it? I’m talking about finances.
Some aspects of running a business are decidedly more fun than others. You’re naturally going to spend more time on the things you enjoy.
Working your way through that shoebox of receipts and reconciling bank statements is rock bottom on the fun scale for many of us. It can turn into a once a year, last minute effort at tax time. I understand completely. I hate doing it, too. (Note: If this is your idea of fun, and you’re good at it, there is definitely a market for your work!)
However, the consequences of avoiding this tedious task are serious. Without regular monitoring, it’s impossible to really understand your financial position. Cash flow problems can take you by surprise – and that can really mess with your business. Or even kill it.
Try answering these questions:
What was last month’s income? Last month’s expenditure? Last month’s profit?
What was last year’s income? Last year’s expenditure? Last year’s profit?
How much money do you need to earn each month to break even?
How much money do you need to earn each month to live well?
Do you have a financial reserve? (How many months could you survive without income and still pay your expenses?)
Do you know how much profit you make on each of your services / products?
When did you last review your expenses?
When is your next tax payment due?
This is by no means a comprehensive list of things you could be monitoring, but it will give you an idea of whether or not you are paying enough attention to your business finances. If you struggled with some of these questions, it would be a good idea to start paying more attention. Maybe set aside a regular timeslot once a week / fortnight / month to process receipts and invoices and take a look at your financial position. If it’s really something you can’t bear to face on your own, or you don’t know enough to do it well, outsourcing to a professional might be a good option for you. Ask around for recommendations.
Are you already on top of this? Got your finances sorted? How did you get there? Love to hear your comments!
