Every move you make05th December 2018
Imagine that you stopped enjoying running your own business, and decided that the time was right to go work for someone else instead.
You would never make a move like that without carefully thinking through the financial implications, would you?
Obviously, you’d think about how much money you’d make in your new job, compared to now.
But you would also think about whether you had money to tide you over, in case you didn’t find that new job straight away… You would think about what it meant for your pension… And how it might impact your future earnings, 10 years down the line.
You would be very aware that this change in your life has broader financial implications.
Happily (I hope), you’re still running your own business.
So do you take the same kind of approach there? Do you carefully think about the financial implications of your business decisions?
……Because make no mistake: Everything you do in your business is intertwined with your finances.
I’m bringing this up is because right now, company owners up and down the country are busy putting together plans for 2019.
You are probably making decisions about expanding your marketing…. Streamlining your delivery…. Changing certain offerings…. Going after new markets….. Adjusting your overall strategy.
Each one of these can not only affect your bottom line, but has knock-on effects for your finances that you may not have considered - like creating temporary cash shortfalls, affecting how long it takes customers to pay you, or necessitating a change in your pricing strategy.
That’s why good financial management is so crucial if you want to run your business smoothly. You need to understand the underlying financial fundamentals of your business, so that every decision you take makes financial sense, and you can cope with everything that’s thrown at you.
A couple of weeks ago I recommended that before developing your next business plan, you carry out a SWOT analysis of your business. But really, you should go one step further – and carry out a separate SWOT analysis of your business finances.
Look at your overall financial position, as well as your financial processes and systems. Some key points to consider:
Cash cycle – Do your customers pay you fast enough? Do you have enough cash coming in to replace what’s going out? After spending money producing your product, how long does it take to bring in sales?
Business debt - If you’re using credit, are the rates good enough or could you find better? Is debt (still) the best way to fund your business, or are you borrowing money you don’t really need?
Ins and outs - Are your costs right? What about your prices? Margins? Overheads?
Oversight – Are the numbers your accountant gives you reliable? Are they helpful to you in running your business? If not, what’s missing?
Spending and investing - How well do you pay your bills - do you spend extra to cover late fees or large amounts of interest? Are you investing in the right things, and can you afford to keep funding them? How well do you put any surplus cash to use?
Getting your finances right is your number one job as a company owner, because without money, you don’t have a business.
When you really understand where you are financially – your strengths, weaknesses, and what might be coming financially around the corner – you’ll be able to make better decisions for the coming year.
Big corporates take it for granted. And you need it, too, to grow from £1 million or £2 million to £10 million – and beyond.
At Insight Associates, this is the kind of information we give you about your business every single month – not just once a year. Imagine how much faster you would grow, with this information at your fingertips.
If you’d like to put this asset to work for your business, get in touch now.