In today's issue of Profit & Joy Simplified, I'm going to share some challenges you may encounter as your business grows if your financial statements aren't kept up to date.
Capture your financial results accurately, and you're much more likely to make good business decisions going forward & put your efforts into the most important parts of your business.
Unfortunately, most growing businesses are focused on the day-to-day running of the business and putting out fires...and just haven't prioritized their financial statements.
The Impact of Messy Accounting
If your financials aren't complete, or accurate or up-to-date, you'll face these challenges:
Challenge 1: You don't understand your business's financial health.
Your business numbers reveal how much it costs to make every dollar of revenue that comes in, what drives that revenue, how much is spent on different costs, and more.
When you have up-to-date financials, it's kinda like having a report card - it is talking about the past, but it sure helps you spot if you're on track or not.
Challenge 2: You may suffer from cash flow stress.
Financial statements keep track of who owes your business money, who you owe money to, and when all that money is expected to flow in and out.
Cash flow is the #1 most cited reason businesses fail. Read that again because it's really serious. You cannot run a business without cash.
With accurate financials, your projections will improve so you can prevent those problems before they happen. I recommend a 13-week rolling cash flow - or at least monthly.
Challenge 3: You are reactive rather than proactive.
As a business owner, it's important to create your vision of success so you have a goal to work toward.
Financial statements tell you where you are now & allow you to set an action plan to steps to get to that goal.
Without them, you tend to just respond to the fire of the moment, the biggest client, best use of money today. It's a strategy of hope. And hope is not an effective strategy. #justsayin'
Challenge 4: Tax deadlines are a nightmare.
Without financial statements, you find yourself scrambling for every tax filing. You won't have the right level of detail available for your tax advisor.
In addition, if you don't have a good cash flow plan, you might not have money set aside for tax payments. This is a stress I hear all the time.
With financial information, we can anticipate taxes that will be owed and set that cash aside (remember the cash flow planning we do!).
You also will have all the information your tax advisor needs ready so that is simply a data transfer rather than the stress it's been.
Challenge 5: You can't optimize pricing.
If you aren't doing a good job of capturing time and expenses, you don't know how much each service or product costs you to provide.
Without this information, you can't be sure that your pricing will result in expected profit margins. Profit is a planned strategy when done right - not a hope. Hope is not a strategy in business.
Financial information can reveal how much is spent and earned on each offering so you can evaluate which services make the most sense. You'll see which are cost-heavy in time as well as dollars - and make evaluations accordingly.
So, now what?
Take control of your finances! Let's get those financial statements accurate, timely & complete so your business can reap the rewards!
Okay, but how?
Try these:
QuickBooks Online or a Spreadsheet- if you want to DIY your accounting, please please please invest in accounting software or set up a spreadsheet. Accounting is its own language so using software will make it much easier.
Hire a bookkeeper - you probably don't need a full-time bookkeeper to start out. But get a dedicated one that you work well with. You're entrusting this person with accurately recording your financial information so this is a key role. Not super expensive, but key.
Learn to READ your financial statements. Seriously there is so much golden insight in them that will help you spot trends, determine break-even levels, assess profitability by service, and even leverage the peaks and valleys in your business. (This strategy part. is thee fun & rewarding part! It's what I do & love!)
I hope this newsletter will motivate you to take steps to take control of your business finances.
As your business grows, having accurate and complete monthly financial statements will help you achieve your goals.
And achieving your goals is what you really want, right?
See ya again next week!
P.S. Whenever you're ready, there are 3 ways I can help you
1. Get help building a cash flow forecast or understanding the levers affecting your profit here.
2. Want to chat about how I can help you achieve your vision of success as your fractional CFO? Schedule a call to see if we'd be a good fit to work together.
3. I post on LinkedIn every weekday at 7:15a CST. I'm responding to comments & engaging in posts from 7:15-8. I'd love to connect. Find me here!
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