One thing for sure that will make any business owner’s blood pressure rise is to look over at the huge pile of paperwork that hasn’t been touched all year at TAX TIME! Unfortunately this scenario is so common among entrepreneurs, and each year business owners vow to do better with their business financial check up…but DON’T. Finances are the pulse of every business. Alone it determines if the business or organization lives or dies. Lack of managing the finances is a sure way to send your business to an early grave. Statistics have shown that poor record keeping is the leading cause of why businesses fail. Many entrepreneurs are gifted with a host of talents and ideas, but to ignore the importance of the financial side of running the business is simply unwise.
As the old adage says “you need to know where you are, in order to know where you are going”.
We must have be organized and have a plan. We must have processes in place to track how well we’re doing on that plan. We also need people, the right people to assist us in understanding issues outside of our realm of expertise. Without these things in place, we will not grow or worse, we cease to exist. Here are 3 tips that will help address the importance of healthy business finances and practices.
3 steps for your Business Financial Check Up
- Get organized!
Adequate record keeping a vital part of keeping your finances in order and should be practiced regularly. Many CPAs cringe at the sight of business owners walking into their offices with a shoebox full of receipts. In fact, submitting organized documents at tax time actually SAVES MONEY! Accountant’s fees are automatically reduced when they are able to navigate through the business documents with ease. Additional benefits of becoming organized are reduced stress, a greater sense of control, and a more effective work environment.
- Develop a plan!
Would we begin building a house without a set of well laid out plans? Of course not! So, the same care and consideration should be given to our business. Where do we see the future of our business? What are our short and long term goals, and where are we in the progress of achieving those goals? Having a plan and revisiting it often keeps us on track for accomplishing our vision. Remember that when setting goals, even financial ones, they are most effective when they are Specific, Measurable, Attainable, Relevant, and Time-Bound.
- Get help!
Let’s face it, technology has spoiled us. Many small business owners feel that managing their finances is calling into their bank to check the daily balance. Quite the contrary, as we realize that the bank balance is not always the most reliable nor does it give us complete information regarding business performance. We need to categorize our expenses and income. We need to know if there was profit or loss for the month. These numbers, among others, are vital for businesses to make important decisions and to grow to the next level. If we apply for a loan or need investors for future growth, they need to see proof of business performance before they can “SHOW ME THE MONEY”. Sorry, I love any opportunity to quote Jerry McGuire! Nevertheless, if an owner lacks time and/or expertise to properly manage the business’ finances, then a red flag should be raised to ask for help. Hiring the right accountant or bookkeeper can be the difference between survival and profitable success.
So in summary, here is your prescription for getting financially fit for the New Year and staying that way!
RX: Don’t wait until a problem arises. Began organizing your financial records now and develop a system to monitor the performance of your business. If you aren’t able to handle it on your own, get the right help!