Understanding your small business finances.
To stabilize, grow and succeed, you must have a sound grasp on finances. This includes three basic financial reports:
- Balance sheet.
- Profit and loss statement.
- Cash flow statement.
Understanding these and interpreting them correctly will help you manage your business with confidence. This financial groundwork is essential to establishing policies and making decisions that are practical and goal oriented.
Proactive financial management
You shouldn’t wait until you are in the red before you concern yourself with finances. That sets you up to jump from one crisis to another.
Instead, take a proactive approach – it’s what the most successful businesses do.
It’s not a coincidence that successful businesses have proactiveness as a commonality: When you’re not fighting fires constantly, you’re able to notice trends and distinguish new opportunities that arise.
But how do you take a proactive approach to financial management?
Here are four quick tips:
- Familiarize yourself with financial statements (see above).
- Read and analyze those statements regularly. Schedule a time to do this, perhaps monthly.
- Compare real financial data to the budgeted/projected numbers. Identify discrepancies and weaknesses before it’s too late.
- Adapt your budget and plan strategically around the data.
Get the help you need
- Learn basic accounting terms and practices.
- Understand what your financials are telling you.
- Create a cash budget.
- Identify long-term strategies for planning a successful transition.
Check out our training options to fit your needs.
If you’ve got specific questions or need additional assistance, we also offer meetings with our consultants and mentors at no cost to you.