How do you take control of your business finances without spending a bunch more time you don’t have and reduce your stress? After starting & selling multiple companies, including a three-peat INC 5000 business, Casey Graham has put together “The 8 Non-Negotiables Of Business Finance” and he shares them in this recent training for business owners, Presidents and CEOs.
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The 8 Non-Negotiables of Business Finance
1. Take Responsibility
While you may not be an accountant or certified financial planner, you still must take responsibility for your personal and business finances. Casey learned this the hard way and ended up with a surprise tax bill one year because he wasn’t engaged in the finances of the business. You must make a commitment to keep your eye on the finances and the system outlined in the following non-negotiables.
2. You Don’t Have To Do It All Yourself
Just because you’re responsible doesn’t mean you have to do all the work. There are three people you need to create a financial system that will work for you.
1. Bookkeeper – this person pays the bills, handles data entry and keeps things organized
2. Controller – this person takes the date provided by the bookkeeper and creates reports that mean something for you and your business. They interpret the information and help you see what happened in the future as well as forecast what’s anticipated in the near future.
3. CFO – a part-time or fractional CFO will help you take your business further, faster. They help you see the bigger picture and make long-term decisions.
3. Stay Focused On The Goal
What’s the most important number you and your team are focused on? If you have a goal you’re focused on, you’ll be much more likely to hit it versus getting pulled in different directions of options and possibilities. The number could be daily sales or new subscriptions or signed contracts – it depends on your business and the mission you’re on. Once you have this number, have your bookkeeper send a DAILY report of where you are with that goal.
4. Know Where You Are
You must know where you are with your finances at all times. Visibility of your income and expenses month to date will help give you clarity and make real-time decisions. Most business owners receive a report on the 15th each month on how the previous month went. This “rearview mirror” approach will lead to getting stuck – you must be able to see where you are what’s coming ahead. I recommend getting a weekly snapshot report that shows you what the income and expenses are month-to-date and what is expected to happen the rest of the month.
5. Look Ahead As Much As You Look Back
As important as knowing what happened in the past is to making decisions, you must be looking forward to predict what’s coming down the line as well. You can accomplish this with a 90-day forecast report you get weekly from the Controller. This report predicts what income and expenses look like in the next three months. You will be able to adjust your sales efforts and budgets for spending based on what you forecast.
6. Make Decisions Off Data Not Gut
Looking ahead with your finances is important, but looking back shouldn’t be totally given up. Reviewing the previous month’s financials will give you great data to be able to make good decisions. Getting an ugly report out of the finance software in your inbox doesn’t have to be the only way you review the previous month. If you’re like most business owners, you prefer to see things in pictures/images. The controller should create simple graphs of your data so you can see what’s happening. It allows you to view trends for the year and how you need to adjust to optimize your business.
7. Pre-Determine The Business Profit
It’s possible to decide ahead of time how much profit you will receive each month. The best way to do this is to budget off percentages. You can put your finances in three categories and decide what percentage each will account for your business.
The budget categories are:
1. Staff – these are all the people required to make your business run
2. Operations – these are all the expenses necessary to run your business (excluding people)
3. Profit – this is your net profit (pre-tax) of your business.
Every industry will require different percentages, but the goal is to predetermine what they are and stick to them. That will mean you need to adjust month-to-month with your expenses and sales efforts to reach your profit margin.
8. Get Cash Out Of Your Business Without Hurting It
Many business owners don’t take as much cash out of the business as they should. But you can pre-decide how much and when you take money out of your business without hurting it. It requires planning and making decisions with your business partners and leadership team.
You don’t have to do all this at once, but taking steps to implement a system in your business for finances will make a big difference for you as the owner. The first step is definitely to find the right people to help you. You do NOT need to spend your time in the details of the finances, but take responsibility to make sure they’re handled by a qualified person or team of people.
Feeling Stuck In Your Business?
I’m currently offering free 30-minute Breakthrough Calls to help business owners, presidents and CEOs with their current business challenge. If you have over $400K in annual revenue and would like help, schedule your free Breakthrough Call today.