Your numbers tell you the story of your business. Your cash forecast provides the roadmap for the next few months.
Your finances are the fuel for your business growth. Your financial knowledge empowers you to make good decisions.
Your products and services are just by-products. That’s why it’s vital that you’re on top of the numbers.
THE IMPORTANCE OF CASH MANAGEMENT
Not putting in the time and attention to understanding the numbers is a common business trap. I’ve made the mistake myself and it came back and bit me.
Even profitable businesses can go bust through a lack of cash to pay the bills. Cash management helps you stay on top of your cash flow and provides the data to forecast future sales and growth.
PROFITABLE SALES FIX EVERYTHING
Success in business is a numbers game. If you have profitable sales, you can get yourself out of most issues. The only caveat is that this is only true as long as you get paid.
A business can be strong and good but you must get paid to fuel your resources. After all, profits are theoretical until they’re in your bank account.
Therefore, you must be on top of your cash cycle – e.g. the journey from starting to make the sale to the point you get paid. If you’re struggling to get enough cash through the door or move the cash around fast enough, you’ll have challenges.
DON’T FORGET THE NON-FINANCIAL NUMBERS
By now, it’s clear that being on top of your numbers is everything in business.
In a money context, the ‘numbers’ relate to your accounts. But, to gain a complete overview of the story of your business, I encourage people to think about and understand the following key non-financial numbers too:
- How many leads you’re getting
- How many inquiries you’re getting
- How many sales calls are you making each day
- How many appointments are you setting
HOW TO FOCUS ON YOUR NUMBERS
Don’t think of accounting as something that happens in a silo. Your numbers provide objective information on the performance of every area of your business. So interrogate and ask questions about your numbers company-wide.
To further your financial understanding, upskill where you need to by reading, going on courses, and getting external advice from a part-time Finance Director or Business Coach.
- Smaller businesses need a part-time Finance Director to give you a sanity check on your finances. As you grow, question if your existing arrangement is reaching the limits of its capabilities.
- Larger businesses need a Finance Director and accounting team in place. As a business owner, you should challenge your Finance Director to be more than a Head Accountant. Encourage them to stare out the window, think more strategically about the future, and drive the business forward.
HOW I CAN HELP?
I’m not an accountant but one of the things I’ve realised over the course of my career is how fundamental understanding the numbers is.
For example, my clients typically experience growth challenges due to having insufficient cash to manage rapid growth. It’s often a case of the leader just not having the time or focus to manage the finances as well as they now need managing.
When I work with clients, I like to see their accounts and challenge the CEO’s grasp of them. If they can explain them to me then they can explain them to everybody else.
If their explanation is not where it needs to be we’ll do something about it. Sometimes it’s persuading the leader that they’re not fully on top of the numbers, even if they think they are!
The level of financial coaching and advice I provide depends on the size of the business.
- Large businesses may already have a room full of accountants managing the finances, and the owner/CEO is probably already quite sophisticated in this area.
- Smaller businesses often require more support. They may have outgrown their current ability. In recent months, I’ve arranged with five or six clients to hire a part-time Finance Director to help them better understand the finances.
I can also help clients raise funding or get a benchmark of what their company is worth today if they’re looking to exit their business.
To discuss your numbers, book a call today.