Top Ten Financial Tips for Business Owners Return
Did you know that some small businesses manage finances only through bookkeeping and tax accounting? Those companies rarely grow because they're not planning, tracking or sharing responsibility for financial performance. Running a business without proactive financial planning and management is like driving without a map, destination or gauges. It's a tremendous waste of time and effort.
But a company need not be large to be fiscally savvy. That's why we assembled this list. Taken from our best-practices toolkit, we present financial tactics used by the most profitable businesses. We offer these tips to help you set and meet financial goals that keep you on track toward success. For more information on how these techniques apply specifically to you, call Beanstalk CFO Group. Get growing.
1. Vision: What do you want to be when you grow up? To reap a reward from your venture, establish what, how & when you want your business to pay you. Envision operational & financial characteristics your business must have to accomplish your harvest objectives. Then chart a course to get there.
2. Measurement: What gets measured gets done. Organize your chart of accounts into manageable components that allow assessment of performance (e.g., profitability) by manager, product line, job and/or customer type.
3. Responsibility: Work as a team. Share responsibility for financial goals. Establish guiding parameters; then allocate authority for setting and meeting fiscal targets to component leaders.
4. Budget: Make a financial road map that leads to the destinations in your vision. Each year, create a monthly revenue, expense & capital budget, assigning major categories to managers. Plan fiscal goals that are SMART: Specific, Measurable, Actionable, Realistic and Time-bound. Every month, track performance against budget and hold team accountable for meeting goals.
5. Leverage: Multiply the power of your money. Mix an appropriate amount of debt with the capital you inject and profits you reinvest in your business. Commonly, business owners use twice as much debt as equity. Debt costs less and carries tax advantages.
6. Cash flow: It’s fuel for your business. Even though you may lead the race, you might run out of gas. Use tools that help you forecast and manage cash. For a long-term view, translate your monthly operating budget into expectations for internal & external capital. If you forecast a need for additional funds to grow, arrange financing early. Near-term, utilize an 8-week projection of cash sources & uses.
7. Focus: Less is more. For maximum financial advantage, concentrate your resources on market niches. However, spread assets and inflows to reduce risk. Within your niche(s), have a variety of customers, equipment and investments. Consider buying a building and renting it to your firm.
8. Vital Stats: Find your pulse. Determine one key metric that most reliably indicates the health of your business. Establish a target for this pulse and monitor it monthly if not weekly. Then add a few more measurements that gauge strength in areas like profitability, productivity, efficiency and liquidity. Track these monthly.
9. Reports: Make a dashboard for your business. Include vital stats followed by income & cash flow statements, balance sheet, profit by component and A/R & A/P agings. Compare actuals to budget via timely, accurate, insightful & actionable reports.
10. Management: The 3 most important ingredients of business success are: management, management, management. Surround yourself with the most effective & entrepreneurial resources available. Bookkeeping and tax accounting simply aren’t enough. A strong financial function will contribute to the growth of your business through proactive planning, control, funding, insight & advice.
Contact Beanstalk CFO Group to find out how we can help you grow your business.
But a company need not be large to be fiscally savvy. That's why we assembled this list. Taken from our best-practices toolkit, we present financial tactics used by the most profitable businesses. We offer these tips to help you set and meet financial goals that keep you on track toward success. For more information on how these techniques apply specifically to you, call Beanstalk CFO Group. Get growing.
1. Vision: What do you want to be when you grow up? To reap a reward from your venture, establish what, how & when you want your business to pay you. Envision operational & financial characteristics your business must have to accomplish your harvest objectives. Then chart a course to get there.
2. Measurement: What gets measured gets done. Organize your chart of accounts into manageable components that allow assessment of performance (e.g., profitability) by manager, product line, job and/or customer type.
3. Responsibility: Work as a team. Share responsibility for financial goals. Establish guiding parameters; then allocate authority for setting and meeting fiscal targets to component leaders.
4. Budget: Make a financial road map that leads to the destinations in your vision. Each year, create a monthly revenue, expense & capital budget, assigning major categories to managers. Plan fiscal goals that are SMART: Specific, Measurable, Actionable, Realistic and Time-bound. Every month, track performance against budget and hold team accountable for meeting goals.
5. Leverage: Multiply the power of your money. Mix an appropriate amount of debt with the capital you inject and profits you reinvest in your business. Commonly, business owners use twice as much debt as equity. Debt costs less and carries tax advantages.
6. Cash flow: It’s fuel for your business. Even though you may lead the race, you might run out of gas. Use tools that help you forecast and manage cash. For a long-term view, translate your monthly operating budget into expectations for internal & external capital. If you forecast a need for additional funds to grow, arrange financing early. Near-term, utilize an 8-week projection of cash sources & uses.
7. Focus: Less is more. For maximum financial advantage, concentrate your resources on market niches. However, spread assets and inflows to reduce risk. Within your niche(s), have a variety of customers, equipment and investments. Consider buying a building and renting it to your firm.
8. Vital Stats: Find your pulse. Determine one key metric that most reliably indicates the health of your business. Establish a target for this pulse and monitor it monthly if not weekly. Then add a few more measurements that gauge strength in areas like profitability, productivity, efficiency and liquidity. Track these monthly.
9. Reports: Make a dashboard for your business. Include vital stats followed by income & cash flow statements, balance sheet, profit by component and A/R & A/P agings. Compare actuals to budget via timely, accurate, insightful & actionable reports.
10. Management: The 3 most important ingredients of business success are: management, management, management. Surround yourself with the most effective & entrepreneurial resources available. Bookkeeping and tax accounting simply aren’t enough. A strong financial function will contribute to the growth of your business through proactive planning, control, funding, insight & advice.
Contact Beanstalk CFO Group to find out how we can help you grow your business.
