Managing Money in my business
Your financial development as a business owner is very important.
If you are happy for your business to remain small, you can continue to concentrate on the daily ‘nuts and bolts’ without worrying about managing large amounts of money or large cash flow issues.
If you expect the business to grow, however, you inevitably will want to employ an accountant, and/or a bookkeeper, a finance director perhaps, as a better understanding of finance in your business will be critical.
We train the basics of starting your own business and managing your money, most of which are fully funded, get in touch and we will let you know if you are eligible and where the next workshop is.
The first question you need to ask yourself is why did you start your business?
If you approach business from a strategic perspective, there are four key financial reasons why you should start a business. In most cases one of the following will be the current key focus of your business:
Lifestyle – you want your business to give you a nice/different lifestyle
Profit – the business is seriously focused on making recurring profits (and you want to attract investors, perhaps)
Legacy – the business has been around for some time and you want it to continue that way (family business, famous brand); or you want the business to fund long term wealth creation activities (property investments) or you want the business to give back in some significant way (philanthropic goals, charities)
Exit – you started because you intend to sell all of it or some of it.
There are several popular models for understanding financial statements. There are fences, pipes, ladders, plates and buckets. Each model is trying to show where money goes. And how the financial statements relate to one another.
Plumbing gets across the idea that money is dynamic and flowing. There are inflows and outflows … and taps and leaks. I understand the concept of flow and at one point I used three pipes to represent the Balance Sheets, the Income Statement and Cashflow Statement.
The key facts are:
• Money actually flows through your business.
• The three financial statements are all connected. There are definite relationships between the Balance Sheet, Income Statement and Cashflow Statements – in this order. This analogy simply helps you to see those connections a lot more clearly.
• Understanding how money flows through your business improves your ability to make decisions – especially around financial control – which improves the stability of your business.