Don’t Abdicate Your Financial Responsibility

Say you’d handed your bank account details to a chronic gambler. How well would you sleep at night? How long before you had no money left? I guess that not many people would be silly enough to give access to their bank account to a chronic gambler, and yet many business owners hand all of their business’ financial information to a bookkeeper, accountant or an internal finance employee without ever looking at the numbers themselves until it is all too late.

Let’s face it. Looking at numbers is not fun. In fact, to be totally honest, it is downright boring (except maybe for accountants). Most men have to shave every day, and for the majority of us, it is not something that we really enjoy doing. But for the sake of personal appearance and professionalism we just do it. Paying attention to your business’ financial information is a bit like that.

Now I am not suggesting that all business owners who have abdicated their responsibilities with regard to financial matters should take on all the accounting and banking duties of their businesses. But you do need to move yourself into the position of a de facto finance manager, a person who, while not actually processing finance data, manages the finances of the business by regularly reviewing the key financial statements of the business such as cash flow statements, profit and loss statements and the balance sheet.

Why Cash Flow Before Operational Systems

Many business owners focus on the operational needs of the business ahead of creating a robust system for protecting cash flow. Inefficiencies and shrinkage in a business can cause a loss in profit, but not ensuring that you have money in the bank is business suicide.

How much cash is in your bank account at the moment? Are you able to pay next month’s rent? What about your employees’ pay checks? How long has it been since you have paid yourself? If you currently find yourself worrying about such questions day after day (and losing sleep in the process), you need to apply the principle you will learn from this chapter before you invest any further in operational system requirements.

Operational systems cost money to implement. There’s no doubt that they are critical to business success. But in order of importance, this ranks below having cash in the bank. You also need cash to be able to support the future growth of your business. It’s not just a matter of covering your present bills, but how you fund your business to make the vision become reality.

Don’t Drive too Fast too Soon

“Hey, Tony, why don’t I just focus on driving more sales in the front door? Doesn’t more sales fix everything?”

In my experience, many advisors teach business owners how to rapidly accelerate sales and profitability, which obviously gets business owners excited. However, if you don’t have the right fundamentals in place, you can actually send your business broke even while experiencing massive increases to the top line.

The more easily you get your wealth the sooner you will lose it. The harder it is to earn, the more you will have”

(Ancient proverb)

“But increasing sales is just outright fun!” So is driving a Ferrari! But you won’t get to drive one every day if you don’t have the means to pay back the money you borrowed to buy it. It’s the same in business. You have to be able to pay for your fun!

What many business owners fail to understand is that there are five factors that affect cash flow. So, for example, if you are driving the top line of your business hard but are not collecting accounts receivable quickly enough or are not turning over stock fast enough, then all the extra sales revenue can dry up very quickly.

Watch Your Cash Flow

ACTIVATION 1
How often do you read your cash flow statements?

__Yearly
__Monthly
__Weekly
__Daily
__What are you talking about?

If you are not looking at your cash flow on a weekly (or at least monthly) basis, you could well be on the road to business suicide. The main reason businesses go broke is because they run out of cash.

Financial prudence is essential for survival and growth. If you are unable to demonstrate the financial discipline of keeping track of the outgoings and incomings of your business, you might find you’ll have difficulty getting a loan from the bank for the purpose of investing for business growth or to be in a position to take the next opportunity that arrives.

ABOUT ACHIEVERS GROUP

The author is founder and Chief Energy Officer of Achievers group. He is a much in demand passionate professional speaker, business educator, author and corporate and business advisor.  He has worked with over 170 businesses around the world.

Website: www.achieversgroup.com.au

Email: [email protected]

Phone: 0410 538 521

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