Taking control of your business finances

Numbers are simple. They reflect the decisions you make.

Purchased new business software? Took out a loan? There are numbers tied to those decisions. As a business owner, you may not be responsible for producing your company’s financial reports, but if you think that means that you don’t need to pay attention to those numbers, you’re in for a rude awakening!

If you’re the leader of your business, you’re in charge of ‘big picture’ decisions. Your financial reports are full of key information about your business that you need to make informed decisions—making it critical that you have a good understanding of your financial statements.

Read your Financial Statements

At least once a month, read your financial statements. Make sure that you understand what you’re reading. If you don’t, ask questions! Being inquisitive about your expenditures, working capital, and cash flow doesn’t make you look stupid. If anything, it shows you’re proactive about building a successful business and instills confidence in those working around you. Check out free online classes to learn more about financial statements with Coursera.

Take the emotion out of it. Running a business can be a roller coaster, but when it comes to reviewing finances, do your best to examine them objectively. Don’t let your emotions cloud your ability to make sound choices. When unexpected costs lead to a rough month, you can’t ignore the cash flow and financial statements for the month. They aren’t going away! Be aware so you can figure out what should be done next.

Build a budget.

Your budget is your roadmap to reach your business goals. Continuously compare your financial statements to your budget to make sure you’re accurately monitoring where you’re spending money. Track items like sales receipts and invoices on a daily or weekly basis. Don’t have a budget? Create one! It gives you a better idea of how much money you have and how much you’re spending.

Set procedures and live by ‘em!

If you haven’t already, set financial procedures and stick to them no matter what! With inadequate billing and collecting operations in place, many companies (even huge corporations) find themselves having cash flow troubles and a high amount of bad debt.

Unless you were an accountant in a past life, it's highly recommended to hire a professional accountant or bookkeeper. While the upfront cost might seem daunting, it's more than worth it for the accuracy, education, and time savings (especially when tax season rolls around!). An expert can help you correctly set up your books, teach you about financial terms, and figure out which financial procedures best fit your business.

Cash-Basis Accounting or Accrual-Basis Accounting? Decisions, decisions…

Your accountant can provide professional advice to help you decide whether you should use accrual basis or cash basis accounting. What does that mean?

Cash-basis accounting means that the revenue and expenses are recorded when the money is physically exchanged and a transaction takes place. Most small businesses use cash-based accounting. Accrual-based accounting is a little different in that revenue and expenses are entered on the books at the time of contract rather than when money is actually exchanged.

As they say, “the proof is in the pudding,” but when it comes to your business don’t take someone else’s word for it.