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Business coaching Brisbane – Financial management 2

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Keeping your receipts in a shoe box and handing it over to the accountant once a year is financial madness.  Don’t be surprised if you are out of business after your first year with that attitude to financial management.

Regardless of what business you are in, you need to keep a close watch on money coming in and going out; and know what your bank balance is on any day.  The least you should do is to buy a small business accounting package.  This will enable you to keep track of revenue coming in and expenses paid out on a monthly basis.

There are plenty of available accounting software packages out there that will do the job.  Just make sure that the one you select is set up for an Australian business.  Our GST, BAS and tax system is like no other.

So once you have your accounting software installed and working, you can now monitor the performance of your business on a monthly basis.  If you input your revenues and expenses daily then you can monitor your business on a ‘month-to-date’ basis.  This is only the first step on your financial management journey.

You need a benchmark to compare against each month.  It is great knowing how your business is going but to be able to see a comparison against ‘forecast performance’ would be even better.  The better quality packages allow you to set up a budget and to design ‘budget v actuals’ reports.

Now you need to prepare a budget.  A budget is really the financial translation of all your plans and strategies.  Your expense budget should be reasonably straight forward because most expenses are known in advance.

The trap to be careful of is that expenses are not the same each month.  Some bills have to be paid weekly, others monthly and some annually.  Take into account the ups and downs of your forecast expenses.  That’s what helps create a realistic cash flow forecast.

I will continue in the next post of business coaching Brisbane with the tough job of forecasting revenue.

Until next time!

Gary

Check out my Aikido Secrets blog at http://www.aikido-secrets-to-calm-success.com

Grab my new book http://www.garyweigh.com/recession-riches-and-wealth

Business coaching Brisbane – financial management 1

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The Aiki business coach

If I had to choose one business management weakness that I have observed in the many start ups and SMEs (small to medium enterprises) I have encountered, it would be financial management.  Many large companies are also guilty of poor financial management but they are no longer the focus of my attention.

Financial management is the most ignored and the least forgiving.  If you can’t maintain control over your finances then you won’t be in business for long.

One of the biggest mistakes is waiting until the accountant has finished the year end figures to find out what happened.  Most accountants do a very good job of preparing Income Statements and Balance sheets but it is old news.  By the time you see what happened, you are well into the next financial year.

Engaging a public accountant once a year does not guarantee success.  Their job is one of compliance, not financial management.  Their main line of work is reporting after the fact, and tax lodgement.  It is not that they aren’t trained and capable of assisting you with financial management, but you have to ask for it.

You really need to know what is happening in your business week by week and month by month.  Either you or someone who understands financial concepts should make financial management of your business a very regular priority.

One of the other main areas of concern is poor control over cash flow.  Cash flow simply means money in and money out of your business.  You might make a profit at the end of the year but there can be many days during the year where your business bank account is empty or overdrawn.

This occurs because the receipt of revenue and the payments of bills are patchy.  Some customers make you wait 2-3 months for your income but many of your bills need to be paid immediately.

This is often compounded by the owner taking cash out of the daily takings for personal use.  The argument is “It is all my money!”  Well it’s not really.  Your money is the part left over when all the bills, including GST and taxes, are paid.

Many people confuse sales revenue with profit and fail to understand the importance of positive cash flow.  Recognising these differences could be one simple solution to saving your cash-starved business.

Read more in my next post in the series – business coaching Brisbane; financial management.

Check http://www.aikido-secrets-to-calm-success.com for business self development tips based on the powerful principles of the Japanese art of Aikido

Until next time!

Gary