It’s so important to be right across your business finances, but you might not realise that in doing so, you can make more money. In today’s episode, I share exactly how knowing your numbers helps you to grow your numbers.
In this Episode:
03.12: Reason #1 – You can see the warning signs if things aren’t going to plan
04.57: Reason #2 – You need to fulfil your legal obligations
07.32: Reason #3 – You can easily identify money leaks
09.57: Reason #4 – You can notice patterns and trends and make confident business decisions
13.46: Reason #6 – You have power in negotiations
15.02: Reason #7 – You can use numbers to make educated decisions in your business
If you’ve been listening to the podcast for a while, you will have heard me talk about how important it is to be across your business finances. But what you might not know is that being across your business finances actually makes you more money. And in today’s episode of the podcast, I’m going to share with you exactly how knowing your numbers helps you to grow your numbers.
If you’ve ever had. The experience of going to pay an invoice and not even knowing if you had enough money in your business bank account. Perhaps you had the experience of going and having a meeting with your accountant, and it sounds like they’re speaking a completely different language to you. Or maybe you’ve come up against an unexpected tax bill and it sort of came out of nowhere, and you weren’t even planning for it. If any of these things resonate with you, it’s likely that you aren’t right across your business finances. If any of this is resonating, I am so excited to share with you that I have something that can help you to become more empowered when it comes to knowing your money.
Introducing the Fix your Finances challenge.
Now this challenge is a free three day challenge hosted live by myself and inside the challenge I’ll be sharing with you why you can’t just leave the money stuff to your accountant? Because it could be costing you dearly if you just leave it all to them, you’ll realise why you avoid looking at your numbers and a hint it’s not because you’re bad at money. You will come to understand the two numbers you have to know to make sure that you never run out of cash in your business, and, you will also learn the secret to being right across your business finances in as little as 15 minutes a week, and you’ll become clear about how to go from confused and overwhelmed to being empowered, confident and, dare I say, excited about your business finances.
So if you want to come join me for that live challenge called Fix your Finances and you can join via the link in the shownotes for today’s episode.
You can see the warning signs if things aren’t going to plan
The first thing that being across your business finances will empower you to do is that you will be able to see the warning signs if things aren’t going to plan. So a lot of times what happens is that we wait until the symptom or the outcome unfolds. It might be what I spoke about a bit earlier on, you go to pay for an invoice and there’s literally not enough money in your bank account. Whereas when you are being proactive, when you are staying right across your money, you will know what is coming up in your business. The cool thing about having that knowledge? Is that you are then able to take corrective action. It doesn’t mean that nothing will ever go wrong in your business. It just means that you are in the driver seat and you can see wow, OK, this is going on or this is what’s coming up in my business. There’s a bit of a red flag there, I’m going to need to take some new action to avoid that thing from happening. The thing is, if you don’t know what’s actually going on, if you’re not staying across your numbers, you won’t even have that information to hand. So what will happen is it will get to the point where the outcome unfolds and rather than being in the driver’s seat and being across it before it even unfolds, being able to make smart decisions.
You need to fulfil your legal obligations
The next reason why? You really should spend the time to get right across your money is that you want to make sure that you are fulfilling your legal obligations. Now there’s the saying, there’s two certainties in life – death and taxes. So we have an obligation to pay tax. And again, I’m sure there’s a whole other conversation about how some people manage to avoid tax, but we’re not even going to go down that path. What I want to make sure is that you are proactively putting aside your tax that you need to pay, there’s no what I call “tax surprise”. You plan in advance and you allocate your tax separately. Another thing that you are likely to do to fulfil your legal requirements is to pay superannuation. So if you pay yourself a wage here in Australia or in the UK in America it’s called 401K. But basically this is money that the government makes you put aside for saving for your retirement. If you aren’t in the detail of your numbers, you might not be putting this money aside. And there can be quite heavy penalties if you aren’t paying your superannuation on time. Another thing that you want to make sure that you’re doing is paying your staff correctly. Are you ensuring that you’re paying them the right amount, that the money is coming out, that you’re paying their superannuation?
Put yourself in a much more empowered place when it comes to making sure that you are fulfilling your legal requirements. Another part of this is that you can make sure that you will have enough cash to pay the suppliers that you owe money to. So if someone does some work for you and you owe them some money for it, you don’t want to have that same the surprise bills when they invoice gets sent to you. You want to be sitting there going, I know what’s happening, I know what’s coming up in my business and I’ve got a plan in place.
You can easily identify money leaks
The next thing that being right across those business finances gives you, is the opportunity to identify money leaks. Now a money leak is money that is disappearing out of your business bank account without you intentionally spending it that way. Someone might even be stealing money from you, and if you aren’t checking your business bank accounts, you might not know that and you might think, well, I would know a lot of times what people do when they’re committing fraud is they actually start with really small amounts and see if people notice. So the only way that you can pick up on potential fraudulent activity, is to stay across it. Maybe you have a subscriptions that you’re not even using anymore that you need to cancel. Make sure that you aren’t spending money without intention without purpose. This is your hard earned money so make sure that it’s not disappearing or leaking out your bucket. You want to make sure that you’re really going “cool, I was aware of those expenses and that’s something that I really intentionally want to invest money in my business”.
Just a reminder that when you reduce your expenses, so when you find something, you go whoa. Whoops, I didn’t mean for that to be happening or you go back and negotiating your contract or something like that, that actually improves your profitability. So just a quick basic refresher, your profit is your sales or your revenue minus your expenses.
So there’s two ways that you can grow your profit. It is either by increasing your sales or by decreasing your expenses and the example that we just spoke about, there is a way that you decrease your expenses, even if you aren’t selling anything more, if you find some costs that you are able to cut that actually grows your bottom line or your profit, which is the money that you get to keep well after tax.
You can notice patterns and trends and make confident business decisions
The next thing that you will uncover is that you will start to notice trends and you will either be able to take corrective action around it or you’ll be able to capitalise on upcoming opportunities.
So let me share some examples of what this. When you become really familiar with your financials, when you look at them regularly, you’ll start to notice patterns. I know in my own business one of the patterns that I’ve noticed is that over Christmas, the January period, I tend to have a slower time in my business. I’ve got young kids and they’re at home, we’re kind of doing the Christmas holiday juggle thing and it can be challenging to be performing at the rate that you are. But maybe you have a retail type business or maybe a service business that’s in high demand during that period of time. At the end of the year. I used to work in retail and that December was our biggest month of the year. So again, when you’ve got that knowledge, when you are empowered with that knowledge, you can then start to make decisions around, well, what am I going to do about it?
For example, I can say, do you know what, I’m actually not really happy to have a slow December/ January anymore and I could say even though I’m going to be juggling the kids, I want to do a launch or a promo during that period of time. That could be absolutely something, that I plan to do moving forward. Or alternatively you might say what I really want to do is take my boom times and make them even bigger. I don’t want to have to do extra things during the lower times. I just kind of accept that, through the Christmas period, I’m gonna be taking a bit more of a chill pace, but that means that I want to make my launch activity or my sales activity at other times of the year much bigger. How do you do that? Again, you look at the dollar, you look at your numbers.
When you’re really familiar with your position, your profitability and your cash flow position, you are able to make more educated decisions around investments. Sometimes you are hamstringing your growth by not investing back into the business. I’ve been a mentor for over 8 years now and I see people at all different parts of the extremes, some people have a tonne of money sitting in their account, and I think, Oh my gosh, you could grow the business so much quicker if you invested in marketing or team or strategy or whatever it might be. On the flip side, sometimes people are really struggling with their cash position and their profitability. So again, wherever you’re at, having that knowledge puts you in the driver’s seat. It might give you the confidence to say, do you know what? Now that I’m really familiar with my money. I know that I’ve got a big buffer there and I can really lean in and invest to skyrocket my growth. Having that knowledge gives you the power to make those decisions.
You have power in negotiations
The next cool thing is having power in your negotiations. So an example of this, it’s very hard to negotiate if you don’t have all of the information available to you. Let’s say that you, do work with someone and you’ve been working with them for a number of years and you know the volume of work that you’re doing with them is increasing. What you can then do is say, hey, you know, two years ago I used to do duh duh duh, for this many hours or this was our arrangement, but the amount of work that we are doing together has grown by 50% and I’d like to negotiate a new rate. See how much more power they’re using that than just coming and saying hi. I want to negotiate with you right just for the sake of it. When you’ve got the data to hand it is a really great negotiating tool.
You can use numbers to make educated decisions in your business
The thing that you can do, and again this is one of the other pros of being a master of your numbers inside your business. Is that you can use numbers for your data analysis to make educated decisions in your business. Now I’m all for intuition following your gut, but there’s also so much wisdom to be found through the actual cold hard data, or the facts.
One of the ways that I use data driven information to make decisions in my business is by having a look at what is resonating with my audience. So every month me and my beautiful assistant Sally sit down and we look at the stats for my business. We say which emails were people opening, what was the open rate, what was the click through rate. Why we look at our social media statistics. And we say, OK, this kind of content is where we’re getting the most views. This is where we’re getting the most likes or engagement. Let’s create more content like that because that is what’s resonating
One of the things that James Wedmore says “Success leaves clues” and I love that little saying so look at the bread crumbs. Look at what they are telling. For me, we would sit down and look at our numbers of what was performing on my Instagram, Sally would say to me, “People love when you dance and you’re reels”. And I was like, well, we gotta give the people what they want!
So you can actually use that knowledge to improve your marketing to improve your reach and in turn of course grow your sales and grow your profit. As compared to just flying blind and hoping.
There’s a saying that I heard recently – “It’s not magic, it’s math”. And this is the power of numbers. Use the knowledge to create better outcomes in your business. I really, really encourage you to start to think about how you can get started on becoming empowered in the space of your business finances. Now, if you aren’t sure where to get started, as I mentioned at the start, I’d love to invite you to come and join my free three day challenge, which is called fix your Finances. This is a brilliant place to get started on your financial empowerment journey. I’ll be teaching it live and there are two times each day for your convenience. I’d really love for you to come along and start to learn into the basics of how you can become more empowered with your finances because ultimately, as we spoke about in today’s episode, if you know your numbers, you are able to grow your numbers. Hope to see you inside the challenge, you can join via the link in the show notes for today’s episode and thank you so much for tuning in to The Clare Wood Podcast.