So I’ll be direct and straight to the point here, to be successful and stay alive in this current environment, business owners must know the financial position and performance of their own business at all times. Just knowing your bank balance is not sufficient. You cannot make proper business decisions unless you know your financial position. This knowledge requirement cannot be delegated. You can delegate the recording and reporting of financial matters, but you can’t delegate the understanding. You can’t say I’m just a salesperson, or I’m just a technician, or I’m just a tradesperson. Monthly or at least quarterly you as the owner should be able to verbalise the basic financial metrics of your business, for example:
1. What was your profit or loss for the period? (month, quarter, year)
2. What is your approximate margin on sales?
3. What is your breakeven point?
4. What are your current debt levels? (banks, ATO, creditors, etc)
To achieve this understanding you need two main things. Firstly, you need an accurate internal accounting system. This part can be delegated. Most often this accounting system is a software program like MYOB or Xero, but it’s not just having the software system it’s ensuring the system is up to date and accurate. The second part is allocating regular time to review your numbers. This part cannot be delegated. You need to sit with your bookkeeper or accountant and go through where you are at. Check the figures and ask questions to ensure you have a good “top-level” understanding of your basic financial metrics.
This financial understanding is very often the difference between the good, successful businesses and those that struggle. If you feel you might be lacking in this area and would like assistance in implementing a system that ensures you have this understanding, discuss it with your bookkeeper, and/or please feel free to contact us.
Wishing you every success.