You should be spending more time on your financials than you are

Financials, bookkeeping, and accounting are an often-avoided part of business. After all, most business owners we know would rather be building their business, innovating, marketing, selling, and counting their cash than sitting down with their books and filling in spreadsheets. In fact, I believe that if we were to measure the knowledge and time spent on various aspects of business, the financial side of the business would be abysmally low.

Yet I would argue that your business’ financials are critical. They make sure that your sales will actually turn into profit. They make sure that your taxes are paid and you won’t be hit with tax liens and fines.

Wherever I see businesses fail, it’s often in the area of financials. Sure, some businesses fail because they don’t sell enough product and other businesses fail because they are poorly managed, but many businesses simply have to shut down because their financials weren’t in order: Expenses were too high, prices were too low, there was never enough money to fund operations, there was never enough money to invest a little on growth.

One business I know of struggled for long time before finally deciding to do something about its financials. A quick look revealed that its expenses were keeping up with income. As soon as the business owner knew that, she raised her prices slightly and got control of her expenses, and completely transformed her business.

Another business I know of was really successful, selling a lot. But at the end of the year, they were hit with a tax bill that was higher than they anticipated and it took them years to pay it off. Had they used better financial management, their tax issue would have been minimized considerably.

Yet another business I know does fairly well, even through the most recent recession. The owner couldn’t understand why he was barely getting by. A quick look at his financials revealed, however, that his receivables were a mess and he may have been earning an on-paper income and paying taxes on it, but few customers were paying him.

So, what should you do in your business?

Step 1: Get your finances in order! Presumably that’s why you’re even at IAC-EZ. Bring some order to your finances and get that aspect of your business under control.

Step 2: Spend more time than you currently are on finances. Yes, I realize no one really wants to spend a lot of time on their finances but it will make a huge difference in your business. (Check back next week because I’ve got an entire blog post just on this topic!)

Jessica Routier, IAC-EZ