I have never been much of an “attention to detail” kind of person when it comes to financial figures. In my early days as a business owner my record keeping would literally be taking a shoe box full of receipts and cheque stubbs to my poor accountant once every few years (hard to imagine that I had issues with the Taxation department isn’t it?).
I had no idea about cash flow, account reconciliation, profit and loss or balance sheets. I bumbled my way around these things for almost twenty years. I never had accurate figures, my accounting was simply adding up money in and money out in my bank account or seeing how much was in the till at the end of the day. Of course I couldn’t budget, I had no way to manage money and I never knew how much anything cost.
I didn’t realise how important this really was. My philosophy was always on the front end of the business. Focus on making money and as long as you make enough you wont have any problems. Unfortunately that is so wrong for so many reasons I don’t know where to start.
To be successful in business and to make your business as BULLETPROOF as possible you have to have access to accurate financial figures that are current as they can be. Ideally you need to know at the end of each day exactly what the financial position of your business is. You have to have complete faith in the figures being given to you either by an accountant or your bookkeeper. You have to know your debt position and all liabilities. Nothing is worse than getting a huge surprise bill that you didn’t know was coming.
Having accurate reports is great but they are of no value at all if you can’t read them or understand them. I make a point of getting my accountant to always explain financial reports. I read a lot of books and ask a lot of questions. I get copies of Public Company Annual Reports and read through page after page of figures to form my own opinion on the financial state of the business. I learnt how to make cash flow forecasts based on the payment history of my clients and so on.
My biggest realisation with all of this was that none of it is that complicated. All it takes is some effort and time to learn what the numbers mean. It won’t take long until you get to see mistakes on reports or pick up issues in your business that before you wouldn’t even have known about because your reports were not accurate enough to pick up this information.
Knowledge really is power, especially when it comes to figures and running a business. Numbers tell you so much about the state of your business. They tell you whether or not you are making money, something that is surprisingly hard to tell at times, how long any cash reserves will last, is your business growing, how quickly do you collect money and so on. A business with great records is always worth more than one with poor records, for obvious reasons.
I believe that it is impossible to BULLETPROOF any business if you don’t have accurate figures that you can understand, delivered to you as quickly as possible.