Do financials freak you out? You have no idea where to start, and your eyes glaze over when your accountant starts talking numbers?
As a business coach, I find that women in business are often very good at what they do, but they put their head in the sand when it comes to their financial results. So, I’m going to share my tips on how to break it down so that you aren’t getting overwhelmed by numbers.
Step 1) Understand your business model
You should spend an appropriate amount of time for a business of your size. If you are only a small business, you certainly don’t need to do a detailed financial analysis each month!
Step 2) Set some systems
Now that you understand your business model, how much are you willing and able to invest into managing your finances? In an ideal world, I’d suggest the following:
- An accounting package- any of the big ones are good, my personal favourite is Xero
- An accountant. They will prepare your BAS and Tax Return as well as advise you around your business structure and tax minimisation
- A bookkeeper. They will do all the fiddly work for you each month of reconciling your accounts so you can keep focussed on what you do best
Obviously, you need to be pragmatic about these things and only invest when it makes sense for your business.
Step 3) Stay across your numbers
No matter what size your business, there should be 2 things that you are ALWAYS across:
1.Your cashflow– this is planning out the cash that is going in and out of your business for the next 6-12 weeks. You should update this every week to make sure you have enough cash to pay your bills
2. Your profit and loss statement– you should review this every month because this tells you how much money your business is making
And depending on your business model,
3. Your balance sheet. This is if you have material receivables, payables and stock. This is another report to review monthly to make sure that you are managing your assets and debts correctly.
I’ll provide further detail on Step 3) in coming blogs. But the important thing to take away from Step 3) is to understand your results and then to action on the “why” and “what now”.
So, while numbers may seem a little bit overwhelming in theory, it is actually not too hard to manage them once you know how. After all, ultimately you are in business to make a profit, so it’s really important that you understand if you do and how to grow your profit.