Would you like to make better financial decisions in your business?
Many small business owners make their financial decisions based on what’s in their bank account (or what’s not in their bank account). Or it is based on how they are feeling and this can be a recipe for disaster.
Business is a numbers game so to be a successful business owner you need know the numbers of your business. This include understanding your financials.
So how can you become better at understanding financials in your business and make great financial decisions?
Here’s three steps that will get you on your way…
1) Make Sure Your Get Accurate Accounts
The first step is to make sure you are getting accurate accounts. How are you going to make a good decision on bad information? By making sure that your accounts are up to date you can start making decisions on facts not just feeling. By ensuring your accounts are accurate it will show you exactly what is going on in your business. And more importantly what is going on in your business in a timely fashion. This will help you make better decisions.
2) Invest Time and Money in Your Financial Education
Next is to invest time and money in your financial education. By investing time and money you will become better at what you do. Just like learning a new language you’ve got to learn the language of numbers. Things like the difference between cash flow and profit. Things like understanding the difference between gross margin and net margin. Learning and understanding what some of the drivers are in your business. Invest in yourself by doing courses, reading books or watching videos. That way you’ll start to learn what the numbers mean? This might be a little bit hard at first but like anything new, it becomes easy as you go on. There may be a little bit of getting used to in terms of understanding the language, learning the tools, learning the techniques to understand that better. The great thing is once you’ve learnt it (and you use it), you will have that knowledge for life.
3) Review Your Numbers Regularly
Finally, review your numbers regularly. By reviewing your numbers regularly you will start to get good at understanding what is happening in your business. You will start to understand trends in your numbers. You will learn what has the biggest impact on your bottom line – what causes a good month? What causes a bad month? You’ll start to make better financial decisions in your business.
One of the great things we get our customers to do is to review their numbers every month and compare them to:
- their targets;
- the previous month;
- the same period last year.
That way you start to get points of reference. You start to build up a picture of what is happening in your business. And the more you know about what is happening in your business you will make better financial decisions. You’ll make quicker decisions and more solid decisions, and ones that will benefit you and your business future.