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Know Your Business

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Myths in Business Part 2

Do you think any of this?

  1. I need a bookkeeper to clean my books so I can file my taxes?
  2. I don’t want to spend time forecasting the unknown. I need to just do the work.
  3. I am going to outsource everything including all Accounting & Finance.
  4. I am a Creative or in Sales, so I am not good with numbers.

Last week I introduced some misinformation in business. This week I want to explain why this is bad information and will hurt your ability to launch, sustain, or grow a business.

1. You Need More Than Bookkeeping.

First of all, there is nothing wrong with bookkeepers. I use them to help me do the accounting, pay bills, and send out invoices. They are essential to making sure you have financials.  I have noticed that some bookkeepers are very tax oriented. They are simply trying to get your financials completed for your tax returns. If you have a bookkeeper that is a few months behind, then you can’t use your actual financials to run your business. This is a problem.

You need to make sure your bookkeeper is getting you consistent financials each month, hopefully by the 15th, if not earlier. I know that it can take some time to get to this point but it should be the goal. You should also be able to understand your financials. Bookkeepers most likely do not provide you the analysis needed to explain what is going on in your business.

2. Forecasting is Essential

Once you have financials that are delivered on a regular basis, you can use this to develop trends and put together a reasonable forecast of your business. Everyone can create a forecast that will show you an Income Statement, Balance Sheet, and Cash Flow Statement. Forecasting on a regular basis will be motivating and ensure you are moving toward your goals.  You will spot potential cash flow issues well before they cause a major problem.

We don’t have time not to forecast, and we don’t have to spend much time.  I find that it is so much easier to see the business at the higher forecast level. We need to take a step back and see how revenue, expenses, and cash are related and if we are even moving in the right direction. A forecast helps with this. Sometimes we get so busy answering emails and meeting client needs that we forget to step back and see the financial big picture. It is important to see this picture and understand the changes in the forecast as things change.  Of course, the forecast will change so don’t let the fact that you don’t know everything prevent you from doing a forecast.

3. You Can Outsource But Understand

I totally understand the desire to outsource work to a contractor and just leave it alone. We outsource work so we don’t have to do it ourselves. I recommend that you fully understand and monitor what you are outsourcing. You cannot do all the Accounting & Finance but it is the obligation of the owner and executive team to understand the financials and the forecast. Be careful not to outsource it all that you really don’t know what is going on. Have regular meetings with your bookkeepers, accountants, and even fractional CFOs. Understand how the business is changing. Challenge them to explain what is going on and hold monthly meetings to answer questions and explain how they are interpreting the financials and forecasting trends.

4. Everyone Needs to Know Numbers

We all have our gifts but financials are not that hard. Most of it is simple math. It worries me when business owners close their mind to understanding the financials because they are Creative or not good at math. I think we all are creative in one way or another and the math isn’t that hard. Understanding your numbers is essential for the success of your business, department, nonprofit or whatever you are leading.

I hope this has convinced you to change your thinking. We all want success in business so we need to take responsibility for the numbers. The more we take responsibility for everything, the more we can have success. Of course, we aren’t in control of everything. I believe in a Creator that is in control of everything. I do believe that God does give us the ability to think, plan, and seek the wisdom of others and God. We need to understand the bookkeeping and get this information quickly. We have the information to develop a forecast and should see where we are trending. There is nothing wrong with forecasting, adjusting, and forecasting again. This is how we learn and this is how we see issues. It is amazing what you can catch that will increase revenue or save money. Finally, everyone needs to know their numbers. Why not?

We all can learn new skills if we are open to learning them. If the success of your business means that you learn numbers, wouldn’t you do it?