My Key Messages For 201621st December 2016
Occasionally people ask me what is the biggest single step they can take towards gaining financial control of their business.
Well, as we approach 2017, I’ve spent some time re-reading the Blogs I wrote this year.
I’ve covered so many topics – from cash flow and credit control to your relationship with your bank, systematising your finances and knowing when to upgrade your accounting software.
Yet one theme came up again and again: The importance of planning your finances.
Here are some of the essential steps we talked about:
• Plan your cash: So many good businesses fail because their CEOs are caught by surprise when they run out of money.
You must get to know your figures intimately. Make sure you know what’s coming in, what’s going out, when bills are due and what your cash situation is.
We recommend a daily review of your cash position to help spot problems before they become urgent, and deal with them.
Securing your cash flow is the most important thing you can do – too many businesses go bust despite being profitable simply because they run out of cash.
• Plan your budget: Plenty of companies set ambitious financial goals as part of their budget, for example a 20% rise in revenue. Yet all too often, they have no real plan for how they are going to achieve them, so those “goals” remain wishful thinking.
Understanding what actions your business needs to take in order to fulfil their goals should be the basis of any good budget. If you know that to achieve a 20% rise in revenue you’ll need two extra salespeople, make sure that happens!
• Plan your business: Build your business deliberately rather than allowing it to develop haphazardly.
Think carefully about how you want your business to look when it’s ‘done’ – what kind of turnover do you want to achieve? How many employees? Then put the right processes and foundations in place. Your company will develop more smoothly.
• Plan for emergencies: Be a pessimist – plan for the worst financial eventuality. Make sure you have a contingency budget in place to ensure your survival in case the worst happens.
As you can see, financial planning is essential for both positive and negative reasons. It makes it easier to achieve your growth goals, and to function smoothly. It also help you pre-empt disasters that could potentially sink your business.
On a personal level, with good financial management in place, you will find running your business much less stressful.
When you’re not constantly fire-fighting…
When you don’t have to worry about nasty financial surprises….
You will feel much more in control, and have more time to devote to other tasks that are essential for growth.
As I explained a few weeks ago, there is even value in the process of planning itself. Properly planning your financial goals, budget and cash flow forces you to look carefully at your business’s priorities, structure and the way it functions. You will learn a lot about your own company, and make better decisions as a result.
So here we are, just a short while away from a new year. If there’s one thing your business does differently in 2017, I urge you to do a more thorough job planning your cash and finances.
It will make an enormous difference to the success of your business.
And if that’s something you would like help accomplishing, watch out for my regular blogs.