Whether you run a small business or large, and regardless of what stage your business is in, good financial planning can make a business successful and profitable. A lack of financial management is a large reason businesses do not survive. Did you know that 82% of businesses fail due to financial mismanagement? A scary yet preventable statistic.
The U.S. Small Business Administration states: “Accounting for revenue and expenses can help keep your business running smoothly. Make sure you maintain proper bookkeeping and have a basic knowledge of business finances.”
If you want your business to be in it for the long haul, successful, and profitable, you must understand your business finances. You don’t need to be an accountant or bookkeeper, but you need money management skills to oversee your business finances. You need to understand your financial reports and make confident day-to-day business decisions to ensure that you make smart, profitable business decisions.
The top 5 ways financial mismanagement will kill your business:
1. Profitability
If you are not tracking your business revenue and expenses, then you have no idea if you’re offering and businesses are profitable. The primary purpose of business is to make money, so if you are operating your business at a loss, your business will not sustain itself for the long term. Get to know your business numbers and optimize the profitability of your business.
2. Uncontrolled expenses
Quite often, what kills profitability is expenses that run too high. When you are aware that you are overspending, you can adjust. If you know there are money leaks in your business, then you can plug them in. When you understand how the volume of sales and expenses affect your bottom line, also known as your profit line, you can adjust so your business becomes profitable. But you need to read your financial reports to get that information, so start having weekly, or monthly money dates with your business to get on track for good money management.
3. Cash flow
Part of good financial management habits is monitoring your cash flow to ensure that you have enough money flowing into your business to keep current with your financial obligations. Cash supply drying up is one of the biggest reasons for business failure. Small Business Trends stated that 29% of small businesses fail due to cash shortages.
4. You make decisions that damage your business
You drive blindly if you run a business without being financially informed of its performance. You will have no idea if your decisions are good business decisions. You want to make smart daily decisions for your business, and every decision you make for your business impacts profitability. To understand how your business creates profit and optimize that.
5. Banking and lending issues
Any type of investor and bank will require your financial statements when considering investing or loaning money to your business. Without accurate financial statements, which cannot be produced without solid bookkeeping records, you will not be able to obtain the cash infusion you want in your business.
If you want to create a successful business, you need to know your business numbers. Poor financial management skills will have your business to be lost without clear direction. Invest the time you need to learn these financial skills to optimize profit in your business. Profit is the money that increases the value of the business; when you optimize profit, you increase your business’s value. A good business financial coach will have a program with a good support system to make it easy for you.
Grab your FREE 5-Step Roadmap to a Profitable Biz and start your money management journey to profitability today!
