Your accountant is NOT your CFO!
While incredibly important, accountants are historians, and they often spend their time looking in the rear-view mirror.
Now don’t get me wrong, I’m not saying this in an attempt to discredit them (I’m actually an accountant myself), but the reality is, most trade business owners only see their accountant once or twice a year, and that’s just to get their tax sorted…
By the time you get the numbers from your accountant, it’s too late, and while you can learn a lot from history, you can’t survive on it.
You have to know your numbers in the present, and a large majority of trade business owners that we speak with, aren’t on top of their numbers! Even down to the basics like, ‘How much gross profit do you make on average for this type of work?’
*insert crickets*
This isn’t financial management!
As the director of your business, it is absolutely critical that YOU are financially literate and that YOU understand the numbers behind your operation. This doesn’t mean that you necessarily have to be responsible for all of it, but you do need to have a basic understanding.
The better you know the numbers, the easier you can make good financial decisions, grow your profits and the easier your business will become to run!
It’s that simple.
Good financial management puts business owners in charge of their finances and allows them to make better decisions. Poor financial management leads to serious budget and lifestyle consequences that can result in the loss of your business…
GOOD FINANCIAL MANAGEMENT | POOR FINANCIAL MANAGEMENT |
|---|---|
Gives relevant information for control, knowledge and decision making. | Produces volumes of meaningless information |
Helps plan, organise, control and monitor your financial resources | Never gets used |
Is active and consistent | Isn’t active and never happens |
Helps you reach your goals | Masquerades as a software program |
Makes running your business easier and more fun | Leads to late supplier payments, difficulties getting credit |
Helps business owners sleep at night | Leaves business owners stressed |
Fast tracks your ability to build wealth | Increases debt and angst for business owners |
Financial management should be a top priority in every business, no exceptions.
“I don’t have time” is not the attitude of a successful business owner, yes there is a lot to do, but it all comes down to priorities, i.e. you need to be on top of your financial situation, and you need to know your basic numbers.
This all starts with your financial dashboard – a set of metrics and financial data that tells you everything about your money, i.e. where it came from, what happened to it, where it is and why. It shows you a complete picture of what’s happening ‘underneath the hood’ of your business.
Your financial dashboard consists of three financial statements:
- 1The Net Income Statement
- 2The Cashflow Statement
- 3The Balance Sheet
The Net Income Statement, Cash Flow Statement and Balance Sheet measure the vital signs of your business’s operations.
They provide you with critical information about how much profit the business is generating, how much cash you have in the bank to run the business, and the overall health of the business at a point in time – information that in turn allows you to make wise and timely decisions that will keep the business humming like a finely tuned car!
This is important to know because you are the one in the driver’s seat, not your accountant.
And if you can’t read your financial dashboard, you’re driving with your eyes blindfolded.
Do you have to be an accountant, maths genius or financial guru to understand it all? Of course not!
But it is your job to:
And this requires you to understand your financial dashboard, and more importantly, how to use it as the tool it’s intended to be!
An ASIC construction insolvency investigation reported that 70% of insolvencies are cash flow related and then 19% on top of that are due to poor strategic management!
If you want to keep your business out of bankruptcy and reach the most important destination – sustainable profits and free cash flow – then you need to take the basic driving lessons necessary to manoeuvre a profit-making vehicle for the products and services, you manage.
This stuff can be tricky, I understand that, but let me assure you that looking at your business finances doesn’t have to be some scary and daunting task.
So, if you're an electrician, plumber, painter, carpenter, or any other trade business owner, and you want to have the confidence to drive strong financial performance in your business, then click here to access our FREE Master Your Financial Dashboard Download where you will learn how to master your financial dashboard, so you can navigate the numbers and finally drive strong performance in your business with complete confidence!
It doesn’t matter what level of experience you have, when it comes to financial management, this resource WILL be a game changer, that I promise you.
