We all need to take a step back from day-to-day business every once in a while and look at the bigger picture. It’s definitely a worthwhile exercise to do this with regard to your company’s finances, but there is always a worry that you still “don’t know what you don’t know” and will miss indicators of issues that might need your attention.
Here’s a guide to three key areas of focus to help you overcome any blind spots in your own knowledge.
How much time are you spending on your accounts?
Owners of small businesses are well-versed in moving seamlessly between different roles, often within a single business day. To do this effectively you can’t afford any one area to constantly drag your attention from other matters. Is that how you feel about finance? It may indicate you need more resource to free you up.
Are you confident the time you put in is well-spent?
If you’re happy you’re not spending too much time, are you also sure you (or others) are doing the right things? Does it feel like you’re spending time talking about financial uncertainties with your bookkeeper, co-directors or staff without ever getting to the root of problems? This could be indicative that you have a skills gap in the business and might need help putting new systems or processes in place that are simpler and more effective.
Do you have “crunch points” where you have to down tools on other work and focus intensively on finance issues?
Sometimes finance issues don’t manifest themselves in terms of everyday problems, but at unpredictable intervals. These might be cashflow-related, tax-related or associated with particular creditors, but they suggest that there might be something proactive you could be doing in terms of implementing systems to make these times less painful.
Can you get a status of your financial position easily whenever you need it?
It’s vital you can take a quick health check of your current revenues and costs, your sales pipeline and your cash reserves at any time. If you were to ask for this from your staff could they provide it? Or would you know how to access and interpret it yourself? If not, there is the opportunity to look at implementing or improving management accounts to make them more usable.
Do cash crises keep popping up unexpectedly?
All businesses suffer from occasionally bumpy periods where cash is tight. Having some advance warning of those periods makes them much less stressful, so if these times come without any warning then there are things you can do to get better visibility.
Do you feel you can make investment decisions with confidence?
When the business is stable and healthy your thoughts will turn to how you can continue to grow and this involves weighing any risk involved so you know you can invest with confidence. This requires more than just visibility of the here and now, it needs accurate projections with different possible scenarios baked in. If that sort of future planning is something that you don’t have the skillsets or knowledge to perform within the business, then it’s worth considering buying that expertise in.
Do you see the same financial mistakes being repeated?
This is the bugbear of most business owners, seeing the same simple mistakes affecting profitability or losing you sales time and again that you should have won. Often, they indicate the need for better process or more training for staff members. If this is a frustration for you, don’t ignore it, act to fix it!
Are you taking advantage of opportunities to make better profit margins?
It’s very easy to take a snapshot of how your finances are today and think all is well. But it’s key to measure trends over time to give you a better sense of progress. Looking at this annually at year-end isn’t really often enough to pinpoint the opportunities to adjust pricing or negotiate better supplier deals. It’s far more effective to have someone keeping a month-to-month view of where you might benefit from making changes.
Are you able to talk to other people in the business about finance so they play a positive role in your growth?
Directors and finance staff often guard finance information from the view of others in their own business, but a more open approach but a more open approach to finance can be revolutionary! Staff are often keen to be trusted and empowered to help by keeping an eye on financial considerations impacting their area of responsibility. It’s worth reviewing how you might make this happen and what information it would be appropriate to share to get more people in the business helping you grow.
These questions are just the starting point for you to be able to manage your business finances more effectively. But hopefully they’ve prompted you to consider where you might start.
If you’d like to understand more detail about how you can implement some of these things, why not come along to my Business Finance Club. It’s based in Dorset, meets monthly and is a friendly forum for business owners and accounting professionals to share knowledge. You’d be most welcome to join us.
Alternatively, if you’d just like to chat on a 1-1 basis then my door is always open. Do get in touch.
I’ve also produced two free e-books packed with useful tips on how to understand the subject and plan better.