Looking at the bigger (financial) picture

Posted by Bartercard on Jun 28, 2016 10:37:14 AM

looking-at-the-bigger-financial-picture

Understanding the financial health of your business can be extremely overwhelming, especially if you're too busy on the floor with your team to take a look at what's going on at a higher level.

It may be easy to think you're getting the job done and paying the bills – especially if the bills are getting paid – but day to day business choices aren't always indicative of the bigger picture.

If you don't have a background in financial analysis, that's okay – most business owners don't. But that doesn't mean you can let your company run wild and assume everything will be fine; without a thorough understanding of your company's financial well-being, you may be blindsided down the road. Our eBook, The 7 Habits of Highly Effective Small Business Owners, can provide the insight you need, giving you the tools necessary to tackle every aspect of business ownership.

Master the basics

You know that customers pay for the inventory you sell, your landlord charges rent, and you have to pay your employees a salary, but do you really understand your financial position?

Mastering the basics is a big part of running an effective business, and that means being able to take a holistic look at what's going on with your company. You may be making your revenue goals, but how does net income look? What proportion of your revenue is going to overhead? Is your gross profit percentage hitting industry averages?

By learning what questions to ask and what metrics are most important for your operations, you'll be much more likely to see issues when they come up rather than simply glazing over when the finance department tries to tell you that operating expenses look unreasonably high this month.

Keep an eye on cashflow

You may be selling the world's most amazing product, but if you're not making the cash you need to cover obligations each month, there's going to be a problem.

High level financials can tell you a lot about your company's overall health, but the cash you're generating on a daily basis does, too. Without enough income to cover what's due, you won't last long, and paying cash now when you'll need liquid assets later can be the nail in your coffin.

Knowing what money you have and where it's going is essential to daily operations, so it's a good idea to regularly review your existing obligations, what's needed to cover them, what cash you have available, and where you can save if possible.

The ins and outs of operational finance is indispensable knowledge, and without an understanding of where your business stands, or a financial professional to help you along the way, the road ahead may not be as long as you'd like. With help from our eBook, The 7 Habits of Highly Effective Small Business Owners, you can explore the habits you need to learn now in order to ensure your company has the means to keep going indefinitely.

 

Topics: Cashflow, business strategies, small business new zealand

 

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