Financial control is incredibly important to both the long, and short term, success of your business. Chaos could be around any corner and can manifest itself in many ways.
Obviously, when you start your business, you need to make sure you’ve got the right structure; sole trader, company, trust, partnership. But it’s also important to take a look at your structure over time and see if it needs to evolve. Your basic structure has to be right for you, for where you and your business are at right now.
The next step is making sure you have an efficient and knowledgeable bookkeeper. You also need Accountant that is supportive and speaks your language as well as looks though the windscreen rather than the rear view mirror
A great bookkeeper is one that knows their work as well as ensures you are compliant and up to date. They will understand your structure and have a relationship with your accountant
A great bookkeeper will also hold you accountable for your record keeping. Their role is to make sure you have up to date data within easy reach that is regular and accurate
There is more to financial control in the bookkeeping realm than meets the eye. What happens behind the scenes in your financial file is just as important as what you see as an owner. They should ensure that yearly when your tax is complete your Accountant communicates with them for the updates to be made to your file so that the numbers you see year on year are correct.
It’s easy to assume that once you’re up and running, you can hand over the responsibility of keeping you in financial control to your amazing accountant, but it’s not that simple. Nothing ever is!
It’s really important that you ask questions. Hence the importance of an accountant that speaks plain English. The hard truth is that no one cares about your financial control and business success as much as you do.
If you, your business, and your accountant aren’t on the same page, it’s time to step up. If you look at numbers and something doesn’t feel quite right, get a second opinion. If there’s anything they can’t explain to you, it might be time for a new accountant.
It can be hard if you have a history with your accountant, but you and your business are your first priority. If you have a really good relationship with your business banker, they might be able to help, even though it’s not their scope of practice. Your financial control is a team effort. That means your financial team needs to be strong.
Another key element to understand is the fact that operating profit comes before your balance sheet and depreciation. Ask your accountant if there’s any parts of your balance sheet that you don’t understand. Some things can go straight through as a claim, but other things will have to be depreciated.
I really can’t stress this point enough. Don’t just listen, speak up. If you don’t understand something your accountant says, ask again. And again, and again, until you understand. Ultimately, it’s on you if they make mistakes. It’s you that may be audited, not them. It’s your responsibility.
Your pricing is another key element in financial control. You need to be certain that your profits are maximised. You need your prices to reflect a margin that covers operating expenses and as well as a level of profit.
DO the numbers regularly. Measure your costs and understand your efficiency and productivity. These numbers can so easily be overlooked.
I have had clients not change pricing for a long period of time only to find they were losing money a little too late
I’ve had others that were more concerned with what the market would pay, again, that turned into disaster
There is so much power in your numbers. The more you understand them the more powerful you are.
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