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Issue 69

23rd January 2020

The financial wellbeing of your business

You will be in business for a variety of reasons. It could be one of the following:

  • You want to make money
  • The market needs your services and you can do a great job at delivering those services
  • You can build a great business and team
  • You want to change the world and make a difference
  • You want to impact on people’s lives
  • You want to leave a legacy

 

No matter what your reason for being in business, you can be 100% certain that in your business, finances matter. Every decision you make in your business, or don’t make, has a financial impact. That impact can either be positive or it can be negative.

A negative financial impact can result in missed opportunities, reduced profits, cash flow challenges, wealth destruction and in extreme cases going out of business. A positive financial impact can mean taking advantage of opportunities, an increase in profits, improved cash flow, wealth creation and sustainability.

There are 3 questions you should ask yourself about business financial mastery and wellbeing:

Question 1: Do you know your numbers, are your books in order and up to date?

Of the participants who registered for the a4e Business Financial Mastery Educational Campaign, the replies to this questions were as follows:

I know my numbers: My books are in order and up to date:
Yes 49%
No 51%

Think of building your house. Where do you start? You start with the foundation: Unstable foundation = unstable house; Solid foundation = solid house. The main reason for accurate and up to date accounting records is to lay a solid foundation and enable you to build a business which performs well financially. The main reason is not for the auditor, to prepare the year end accounts or for the taxman. Those reasons are secondary.

 

Question 2: Do you have a business budget for the next 12 months and measure actuals versus budget monthly?

Of the participants who registered for the a4e Business Financial Mastery Educational Campaign, the replies to this questions were as follows:

I have a business budget for the next 12 months and measure actuals versus budget monthly:
Yes 38%
No 62%

 

Which of the following statements do you agree with?

Budgets are not important because:

  • My sales vary from month to month
  • My expenses are always changing
  • I can’t predict the future
  • I have no control over the economy
  • I don’t have the time or the skills

 

These are exactly the reasons why you should prepare a business budget. The past is history: You cannot change it. You also can’t predict the future. What you most certainly can do is use the budget to set financial targets and then make plans, allocate resources, and manage yourself and your team towards common financial goals. It takes you from being reactive, a victim of circumstance, to being firmly in the financial driving seat!

 

Question 3: Is your business is profitable, growing and sustainable?

Of the participants who registered for the a4e Business Financial Mastery Educational Campaign, the replies to this questions were as follows:

My business is profitable, growing and sustainable:
Yes 49%
No 51%

 

It is probably no coincidence that 51% of participants do not know there numbers and 51% do not have a business which is profitable, growing and sustainable.

A loss making business will always struggle to achieve positive cash flows, growth and sustainability unless the loss is temporary and part of broader business financial strategy and plan. With a loss making business, there will almost always be more month at the end of the money instead of more money at the end of the month.

Achieving profitability may not be that difficult. Small increases and sales and reductions in expenses will have a huge impact on your bottom line. Profits usually translate into better cash flows. Growth is easier to finance and it is easier to raise debt. Sustainability is more certain.

Taking control of the finances of your business and your destiny: The structured approach

Make the decision today to take control of the management of the finances of your business:

  • Get your accounting records in order and up to date
  • Change from a reactive to a proactive forward looking approach: Prepare a budget for your business
    • Sales and expenses targets
    • Profitabilitytargets
    • Growth targets
  • The strategies and tactics to support this
  • Measure performance of actual against budget:
    • Load the budget on your accounting system
    • Monthly management reports: Actual versus budget
  • Monitor and make adjustments sooner rather than later!

For details about our Online Business Accounting packages:

  • Visit our website at https://a4e.co.za
  • Or call me Robert Jewell on 082 575 4379 today

Have your most prosperous year ever!