How To Take Charge Of Your Business Finances

“Money, like emotions, is something you must control to keep your life on the right track.”

Natasha Munson,

Inspirational author, speaker, and CEO of Be Magic, Inc.

Running a business is rarely plain sailing. Whether it’s the ever-evolving business landscape, recruitment concerns, or supply network delays, there’s always a new challenge on the horizon. Yet, the biggest risk to small businesses, according to Investopdia, is running out of money. 

Clearly, it’s hard to overstate the importance of managing business finances. In a competitive business landscape, losing control of the numbers can wreak havoc on the financial stability of a business.  

A common misconception I often see with clients is that they believe they’re fully in control of their finances, yet this isn’t always the case. As businesses grow, the owner’s financial knowledge doesn’t always grow at the same rate. This can lead to significant financial challenges. After all, we don’t know what we don’t know. 

To help ensure you’re in control of your business finances, this blog provides actionable advice on your journey to financial empowerment.

4 reasons business owners lose control of their finances

Over the course of my career, I’ve experienced cash challenges both in my own businesses and while working with clients. Here’s a breakdown of four common issues, which you may find familiar.

1. Ineffective financial knowledge

Lacking the required financial know-how is a one-way ticket to losing control of your business finances.

It’s not possible to be in control of your finances and make informed decisions about your business if you don’t understand how to gauge the financial health of your company.

For example, misunderstanding your numbers (e.g. expenses, balance sheets, cash flow statements, and profit and loss statements) can lead to missed opportunities to stabilise or expand the business.

2. Focussing on sales above all else

Almost three-quarters of businesses fail because they are overly optimistic about sales. That’s because rising sales do not equal rising profits.

All sales are purely theoretical until the cash lands in your business bank account. So, if you are going to focus on sales, be sure to prioritise profitable sales because profitable sales fix most problems.

Plus, being overly reliant on sales can cause you to miss financial issues elsewhere, such as cash flow management and expense control.

3. Inadequate financial planning

A financial plan is your roadmap to company growth. It allows you to track your progress, gauge financial health, and make realistic decisions based on cold hard data rather than just gut instinct. 

As challenges arise (which they will), having a financial plan provides you with a course of action for how to navigate the choppy waters.   

Need more proof? Companies with a business plan enjoy 30% faster growth than businesses without a business plan. Find out more here.

4. Head in the sand syndrome

When we don’t fully understand something, it’s tempting to look the other way and ignore it. 

Yet, choosing to ignore financial issues will only lead to one outcome: worse financial issues.

Whether it’s a disparity between money coming in and money going out or inefficient cash flow management, facing these issues head-on is the first step to rectifying the situation.

James Akin-Smith reading the book Trillion Dollar Coach whilst smiling at camera.

4 ways to take charge of your business finances

Adopting the following financial habits will go some way to improving your financial management skills.

1. Track cash flow

Cash is king, so it’s vital you monitor if your business is making a decent profit. If it’s not, you know you have to make informed changes. Perhaps you’re not buying right, or manufacturing enough, overheads are too high, or the money is tied into inventory.

If you are making a good profit, you’ve still got decisions to make but from a more positive viewpoint: how best can you utilise your funds to effectively grow your business?

Analysing cash flow also gives you the data needed to identify trends and make adjustments to nip potential financial issues in the bed before they escalate into something more critical.

2. Budget and forecast

Earlier we discussed the importance of financial planning. One of the best ways to set financial goals for your business is to create a budget and forecast.

  • A budget is a ‘spending plan that takes into account estimated current and future income and expenses for a specified future time period, usually a year.’
  • A forecast is an ‘estimation, or projection, of likely future income or revenue and expenses.’

Having both will give you a detailed and strategic roadmap for providing future financial stability.

3. Tax planning

As a business owner, there are numerous tax incentives and deductions available to you. For example, you can make a claim for Research & Development Relief and get relief on goodwill and relevant assets

However, tax can be a taxing issue when you’re not an accountant! That’s why I recommend that clients work with a tax expert to optimise their approach to taxes.You can find out more about tax relief and benefits for UK businesses here.

4. Boost your financial knowledge

Smaller businesses need a part-time Finance Director to give them a sanity check on their finances.

Yet, financial terminology is a foreign language to many. That’s why I recommend that business owners take steps to improve their own financial education.

This could include workshops, online courses, books, and podcasts designed to give you the knowledge needed to understand and question your numbers and make informed financial decisions.

One other option is to work with me. Although I am no accountant, I have the real-world experience to translate your financial situation into easy-to-understand soundbites and ask you the right questions for you to make the right decisions.

To take the first step towards taking charge of your business finances, book a call today

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