Effective financial management is vital for the success and the sustainability of your business, so in this article I’ll be sharing my experience and expertise around the numbers in your business and provide you with some practical strategies that could help you to navigate the financial aspects of business.

1.      Create a clear budget and financial plan

Firstly, I encourage you to start by assessing your current financial situation and set realistic goals to develop a financial plan or model that gives you confidence. What are you basing your decisions on? Creating a financial forecast that outlines your revenue streams, expenses and cash flow projections will provide you with a live document to track and manage your finances effectively.

2.      Understand and sensitise your numbers

In my previous life as a bank manager, I was really surprised how many business owners didn’t understand the numbers in their accounts or what numbers really made their business work. This tip is to encourage you to understand the success numbers – the ones that drive success in your business.

What do I mean by sensitising your numbers? With regards to your budget, ask yourself ‘what if’ questions and have versions of your budget that would cope should that situation occur. Doing so, supports your confidence when dealing with such situations but also enables you to implement a change in tactics efficiently if needed.

3.      Monitor and conduct regular reviews of your finances

Monitoring and tracking key financial metrics really helps you make informed decisions, so keep a close eye on metrics such as your revenue, profit margins, accounts receivable, accounts payable and even your inventory turnover if applicable.

Regularly review your profit and loss statements, your balance sheets and your cash flow statements to gain a comprehensive understanding of your business’s financial health.

4.      Review your expenses

Controlling costs and optimising expenses is crucial of course for maintaining profitability so regularly assess your expenses and identify areas where you can cut costs, or find a more cost effective alternative.

Bear in mind, as soon as you consider an expense to be a cost rather than an investment it’s time to consider removing that spend. Other ways to control costs include negotiating with suppliers to explore bulk purchasing options and embracing lean principles to eliminate waste and optimise your expenditure.

5.      Implement a cash reserve

Building and maintaining a cash reserve is really good financial management practice. It involves having a cushion of funds to ensure you can navigate unexpected expenses or economic downturns or surprises in that those reserves allow you to have choices and help you feel much more comfortable with decision making. We learned during the pandemic that having sufficient reserves to fall back on is essential.

Personally, I encourage you to have about a six month cover, but much will depend on your risk profile.

6.      Take professional advice for financial management

Having seen up close the work of professional advisors like accountants, I encourage you to seek professional financial guidance earlier than most do. Consider working with an accountant or a financial advisor who specialises in small business finances as they can provide insights to help you navigate complex tax regulations or offer strategic advice to optimise your financial management practices.

My final thoughts…

Financial management isn’t just a one-time task it requires regular review and adjustment to continuously evaluate your financial strategy and make necessary adjustments based on the changing market conditions the industry, trends and your business performance. Staying proactive so you can make data-driven decisions ensures that your financial management practices remain aligned with your business goals.

By having a financial management strategy, you can ensure financial stability and that you have a strong foundation for your business’s growth and success.

As always I hope this article has been thought provoking and helpful – I’ve been able to share some expertise and knowledge with you today, but if I can support you any further, let’s have a conversation.

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