How to Manage Your Finances Like a CEO
How to Manage Your Finances Like a CEO
Mar 4
Written By Melissa Houston
As the CEO of your business, you have a responsibility to know your business numbers. You don’t need to get in the weeds of accounting and business finance management, but you do need a high-level understanding so that you can make smart, profitable decisions for your business every day.
There are five essential steps you need to cover to ensure your business finances get managed well:
1. Check in with your money mindset
As a business owner your mindset is challenged daily. You will have good days and bad days, and ensuring your mindset is in shape to weather through the bad days is an important part of being resilient. Having a good money mindset is no exception. It’s important to create a positive relationship with money to ensure that you are not holding yourself back in your business. Everyone has a money story and it’s essential that you understand yours and figure out if it holds you back in business.
2. Know and understand your financial reports
Understanding and using your financial reports is an important element as a CEO. You need to know your business numbers, and financial reports don’t lie. The income statement will tell you how profitable your business has been and will offer feedback on what is going well in the business and what needs to be improved. The most common financial reports used in business are the income statement and the balance sheet. There are many ad hoc reports you can run as well to get valuable financial information.
3. Create a financial plan for your business
Have a business financial plan that forecasts your business 12 months in advance. Having a plan for your business offers your business direction and allows you to plan for profitable business activities. Is your business growing? Ensure you have a plan for growth mapped out and that you can manage that growth while maintaining your profit margins. Profit is the reason why businesses exist and it’s important to create that profit.
4. Monitor your progress against that financial plan
When you have a financial plan, and you monitor your financial results against what you planned it offers timely feedback. You need to monitor your progress against that plan at a minimum of a monthly basis, as having timely results is important to implement changes sooner rather than later. Use the feedback you receive from your monthly financial check-ins to improve operating efficiencies in your business and create more profit.
5. Have a cash management system
Cash is queen in business and 82% of businesses fail due to financial MISmanagement, so ensuring you have a reliable cash management system in place for your business will help reduce the burden and anxiety of financial management. Cash management systems organize your cash flowing in and out and warn you of any upcoming cash shortages so you can plan for a backup should you be short on cash to meet your financial obligations.
The bottom line is when you are running a business there are many hats you need to wear and many moving parts that need your attention, and your business finances is no exception. Even if you have hired or outsourced help to run your business finances, you as the owner of your business and the person who makes the final decisions in your business need to understand the financial health of your business.
Want to learn more about the 5-Step Roadmap to Biz Finance Freedom? Grab your free copy and start learning!