When you think of numbers and financial reports, does your heart sink? Do you want to just bury your head in the sand and pretend they don’t exist? If so, you’re not alone. The vast majority of business owners don’t enjoy looking at their financial reports and numbers.
I believe that the reason for this is that they don’t understand what they are looking at as they haven’t had basic financial literacy lessons on how to read financial reports. Certainly, when business is tough, looking at your finances can make you feel more stressed and more depressed about the state of your business. Like anything, there is the fear of the unknown, which in this case can lead to a negative financial situation or a worsening of an already not so good financial situation.
The key to running a successful business is to make numbers your new best friend. In order to do this, there are three components you need to put in place.
1. Make a decision to love your numbers
Before even looking at any numbers, you need to make a decision. This decision is critical. You have to decide to take an interest in learning about your numbers. You have to have an open mind to finding ways to educate yourself around the numbers in your business.
Be open to learning and find ways to make it enjoyable. Having a positive mindset will make an enormous impact on the way you think about your reports in the future.
Accountants have held out that there’s something mystical about accounting, but really there isn’t. Accounting is mostly adding and subtracting with the occasional multiplication and division. There’s no complex maths involved at all. With calculators and computers to do the sums for you, there’s really very little maths’ knowledge required. So relax and make that decision to love your numbers.
2. Don’t do the bookwork yourself
As the owner of your business, you don’t need to be doing the bookkeeping yourself. This is why many people struggle with the numbers as they are doing the data entry and they put off doing it until the last minute generally hating doing it and begrudging every minute spent on it.
Find a qualified bookkeeper to do this work for you. Spend the time you save in having a bookkeeper doing the data entry for you working on growing your business and take a small amount of time each week to review the key reports.
I have found that as soon as the bookkeeping work is done by someone else, you will have taken away the first major stress about the numbers.
3. Learn to understand and interpret reports
The lack of understanding is what leads to the second major stress around numbers in your business. There are two basic sets of numbers, firstly the financial numbers and secondly the non-financial numbers. Both are vital.
The non-financial numbers tend to be mostly related to sales and marketing and operational processes. For example, the number of leads or prospects, or the time it takes to complete a job. The financial numbers include the financial reports and any figures that relate to the money in the business.
Find a mentor or an advisor who is willing to spend the time to educate you about financial reports generally and then your number specifically. And take the time to really learn this information until you feel as though you understand it well.
When you make your numbers your best friend and are no longer afraid to look at your reports you will find that you become more aware of how decisions you are making in your business are impacting your financial position. Armed with this improved knowledge, you will make decisions which will help to achieve your business goals.
Without understanding your numbers, your business will suffer and you run the risk of potentially a disastrous financial position.