The Basics - Have you got proper Control of your finances...?

I have sent out various messages recently about the upwards growth of the business. This is a general trend which should be used as inspiration to cut across all the negativity on the news and social media. Yes, we are all seeing challenging times but we still move things forward……………

Despite this trend of growth there is one area of business that is cropping up more often than I would like – Financial Control.

Or more frankly – lack of any financial control !!!

And I am talking about many that could be viewed as being very successful.

You can choose to watch the 2 videos or simply read the text - they are largely the same but it could be good to watch and read.

I shot the video on a Saturday during cricket and had to end it as we had a collapse of wickets, hence the need for a Part 2.

This may not be your cup of tea but it is really important.

Part 1

 

Part 2

Remember Sales is VANITY, Profit is SANITY and cash is REALITY.

Even if you are in a good place with your finances and financial control I would still recommend you read this as there may still be some pointers to help you improve.

I am an accountant and even I need a prompt or 2 from time to time.

I’ll be honest enough to say that I have been guilty of not following some of these recommendations from time to time, but it is never too late to change. My team are a constant reminder for me and we are tightening some of our controls because we were losing a bit of control in places and it was beginning to hurt the business.

I hope this email acts as a reminder to never stop exercising GOOD financial control and discipline, or prompts you to TAKE IMMEDIATE ACTION and start changing things for the better.

Here are the facts…………… You simply cannot run a business and maintain your sanity without good financial control and discipline. PERIOD!!!

So, what does this mean….

1. Your Ops System is always UP TO DATE. 

2. You understand that the money in your bank account is NOT all yours. 

3. You budget and allocate the money you collect so you can pay your bills as they fall due and payable 

4. You know what profit you are making monthly (from monthly management accounts or similar) 

5. You know and understand your break even point (the level of sales that will cover all your business and personal expenses / costs) 

6. You pay yourself a wage into a personal bank account (ie. Business and personal finances are clearly separated) 

7. You ensure that customers pay you before you leave any job (maybe a few exception such as certain commercial and account / contract customer). Note – Even some commercial customers have the ability to pay for your service on completion. They just won’t tell you. 

8. Seek an upfront deposit for larger jobs – particularly if you have to buys stock specifically for that job. 

9. CASH is the last resort when it comes to accepting payment from customers. [If you receive CASH you should pay it into the bank or if you put it in your pocket then immediately transfer the money from your personal account to your business account so you can track the money being received. 

10. Avoid using cash to pay for things as much as possible. Set up trade accounts or pay by card so everything is tracked. KEEP RECEIPTS (use Dext, OneTap etc…) 

11. You know if you have money waiting to be PAID by customers – should only be certain commercial and account / contract customers. The OPS SYSTEM should be up to date. 

12. You have a system for ordering ONLY the stock you NEED. If you order more stock than you have actually used then you are increasing your working capital (money tied up in the business) and reducing your bank balance. 

13. You must register for VAT when your sales (in any 12 month period) exceed £85,000. 

14. You submit your Tax Returns each year (on time) and are able to pay the bill.

 

MASSIVELY IMPORTANT NOTE – Making Tax Digital is just around the corner. This will mean that you will need to make up to date Trading Declarations to the HMRC every 3 months. This will apply to everyone. We are looking at how we can help you manage this situation but keeping your financial information UP TO DATE will be essential.

These are just some of the things that make up good Financial Control and Disciplines, however I would always recommend getting a good bookkeeper to help you keep things in order.

But please remember BOOKKEEPERS are not miracle workers, they need you to supply them with the right information so they can keep your finances in good shape.

 

You may think I am going a bit hard on this subject but check out the things that I hear on a regular basis………… and normally as a reason why they cannot pay their monthly franchise fees……

 

• I have no money because I just had to pay the VAT man – WRONG! You clearly have spent the money you should have saved to pay the VAT man 

• I have no money because I just paid my Tax bill = WRONG!! As above 

• I am short of funds because I just had to buy stock – WRONG. You are either buying too much stock or not budgeted to allow you to restock 

• I cannot afford to pay for that…!!! However, you can post on Facebook to say you are on a big night out or on another holiday. 

• I am just waiting (hoping) for a big quoted job to come off so I can get my bills paid – WRONG. If you cannot pay your bills then your finances are incorrect somewhere! And if you are quoting for work, how do you follow up once it is received by the customer. 

• I have no money to spend on marketing -  wrong, you just haven’t allowed for the Cost of Acquisition of a new customer in your Price. (Marketing should be self-funded from each sale you make!!)

 

As a professional business owner you should not be following the age old process of sending all your invoices and receipts to their accountant / bookkeeper once a year and HOPE for the best.🙏

Remember my Email from the other week – Hard Things, Easy Life.  Easy Things, Hard Life.

 

And here’s the RUB……………. I haven’t done any amount of research but I would happily have a wager that says the majority of small businesses don’t have any financial control. For them “it’s just the way it’s done”…. “I just send it all the accountant and he / she does the rest…” 

THIS IS A CRAZY WAY TO RUN A BUSINESS.

If really want to be successful in business then DARE TO BE DIFFERENT….. don’t follow what other do without good reason and understanding the results.

 

BREAK THE MOULD TODAY…..

 And as always we are here to help……….. the team and I have recently had lots of good conversations with people in the network working through the challenges they have in their business.

 If you have any feedback or additional thoughts on this please do let me know…..