Financial Management Of Your Small Business
Learning and applying the skill and discipline to regularly conduct the proper and correct Financial management of your Small Business is one of the key success factors in business today. Yet I am amazed how the majority of Small Business Owners cannot read and fully understand a Profit and Loss Statement, let alone interpret what strategies to undertake to improve anything in their Profit and Loss report.
If you too are one of these Small Business Owners who is uncomfortable reading a Profit and Loss Report because you don’t really understand them, well you can feel a little more comfortable because you are in the majority, but don’t rest easy, because we need to help you to develop the skill and discipline to regularly conduct the proper and correct Financial management of your Small Business.
Key Reports For Effective Financial Management
There are a number of key financial management reports, we as Small Business Owners, need to be able to read, understand and interpret, to take further affirmative action to improve results even more. Mr. Warren Buffet says it well above, “Accounting is the language of business, if you can’t speak the language, it’s difficult to win the game!”
Now even though Mr. Buffet is really referring to Financial Accounting, we at LibAbun, prefer to extend that to “Numerical Mastery” because there are Marketing numbers, Sales numbers and so much more data available to you to interpret. Your business is always offering you ‘data in the form of numbers’ to help you conduct the ‘4-R’s of Business – Recording, Reporting, Reviewing and Re-adjusting.
Now you may be thinking “My Accountant does all that for me!” ‘Yes’ we want your Accountant, or at least your Bookkeeper, to enter all the data to produce these reports, afterall they are the experts to do that. Yet, it is still your ultimate responsibility to conduct the correct and proper financial management of your Small Business. The ‘Taxman’ or any other people you may owe money too are not coming knocking on your Accountant’s door if they become overdue. Nor is your Accountant going knocking on the doors of your customers who owe you money. It’s your responsibility to learn how to conduct the correct and proper financial management of your Small Business. So the ‘Buck stops with you’ – excuse the pun.
There are three key financial reports you really do need to master. These financial reports are;
- Profit and Loss Report
- ‘Cashflow Statement’, otherwise known as ‘Income and Expenditure Report’
- The Balance Sheet.
Now to be clear, we are not suggesting you need to be able to produce these reports. That is the responsibility of your Bookkeeper or Accountant. Yet, you do need to make sure they are updating and producing these reports for you preferably at the end of every month.
Online Accounting Software Such As Xero.
These days the smartest way to conduct your financial management of your Small Business is through the use of an ‘Online Accounting Software’, such as Xero. Not only is it a ‘Smart’ way to conduct business due to the automation and online enhancements in productivity, but many national governments are requiring businesses to go online too. For example, in the UK, the HMRC, is requiring all VAT(Value Added Tax) registered businesses to be using an online accounting software to send in their VAT(Sales Tax) reports as of 31st March 2019. It is expected that every other business will be required to do the same, sometime soon after. This is part of the British Governments ‘Making Tax Digital’ scheme.
That aside, regardless as to whether it is a Government requirement in your country, it is still ‘best practice’ and the smartest way to conduct effective financial management of your Small Business.
Learning About Profit And Loss Reports
Take a look at the short video at the top of this blog, produced by Xero, where it explains how the ‘Profit and Loss Reports’ are presented in Xero. Whilst we actually explain the breakdown of a profit and loss report in another blog, it is prudent to highlight here that the online accounting software, in this case ‘Xero’, is set up so that these reports are a lot easier to produce for your Accountant advisor.
Plus, because it’s online everyone can have access to it 24/7, 365 days of the year. As long as your Bookkeeper or Accountant has been updating the Xero software every week, this will give you access to accurate data in real-time to make better decisions.
Learn More About Financial Reporting For Your Small Business
If you’d like to learn more about Financial Reporting for your Small Business then, you could do this through any of the three options we offer Small Business Owners;
- Come to one of our LibAbun-BEN Business Education Network meetings, where we regularly discuss Small Business Financial reporting and financial ratios. You can register to come to one of our LibAbunBEN meetings here;
- You can find out more about, then register for our online training ‘Understanding the Financials of Small Business’ on our Libabun website;
- You could find out more about our live training, ‘Small Business Financial Management Course’ that we run, again see our Libabun website;
To contact us about any of these courses or anything else, reach out to us either through our messenger service or the contact details in the footer below this blog.