8 things a CEO must know about your business finances
Finance management is the blood of your business. Financial matters can lead to your business being wildly successful or the exact opposite. It can be easy to get comfortable when your accountant is a finance extraordinaire. However, understanding how your business is performing financially is a part of the language of your business. As the CEO of your company, you need to be fluent in every area.
Whether you are looking to grow your business long-term or grow to sale, investors want to know the numbers. We have all watched Shark Tank. Some of us more often than we’d like to admit. What investors want to know is your annual sales, your company valuation, your projected sales, profit margins, and so on. They don’t want to hear this from the Controller. They want to hear this from the CEO/CFO.
According to Wall Street Journal, there are 8 things small business owners should know about your finances:
1. YOU MAY NEED A LOAN
Most people simply don’t have the capital to fund their business fully on their own. This is an area that causes a lot of anxiety and stress for new business owners. Crucial decision making comes into play here. Who to loan from? How much to loan? Your Controller should lead the conversation but, it is up to the CEO to make the final decision.
2. HAVE A BILLING STRATEGY
Cut down on overdue balances by invoicing your clients consistently. Make sure you send invoices on the same day each month or the same frequency each month. You also want to make sure you are paying your invoices and contracts consistently so that your balance is as accurate and up to date as possible.
3. YOU NEED TO PAY YOURSELF
You are an employee of your business. Oftentimes you are the first and only employee. It is easy to want to put everything back into your business but, you need to grow and sustain, which means taking care of home in the process. A safe starting point would be 30% of your net income.
4. YOU NEED TO SPEND MONEY TO MAKE IT
This can cover many areas. Maybe you need a loan to pay your employees. You may need to upgrade or purchase new equipment. Training and development for yourself and your employees is also an investment in your business that will payoff greatly in the long run.
5. YOU MUST REMEMBER TO LOOK AT ROI This one goes without saying but, I will say it anyway. You need to know where your returns are coming from. Some things will work for your business and some will not. Knowing the successes and failures of marketing and other areas and how they impact your overall numbers is HUGE for decision making on spending and allocating money to fund projects.
6. YOU NEED TO CONSTANTLY MONITOR YOUR BOOKS Your eyes need to stay in your books. Many business owners place aside time at the end of each month to go over their books with accounting. This is okay but, for CEOs who do not have an accountant or who have a smaller accounting department, you should be looking at your books more frequently.
7. IT HELPS TO ESTABLISH GOOD HABITS You cannot cut corners in managing your finances. Developing processes and routines will be integral as your business grows.
8. YOU MAY NEED HELP It will bring great value to your business when you hire a professional accountant. This is easier said than done but, know that eventually you will need to have someone managing your finances other than you. In knowing that, you can plan for bringing someone on in due time.
Know that you have what it takes to reach the next level in your business. You have what it takes to reach milestones and surpass expectations. What separates the good from the great is discipline and practice. As the CEO of your business, you have to know your business better than anyone else. You are your biggest business advocate. You can do this.
OUTSOURCE YOUR ACCOUNTING If you are ready to take the next step in your business, outsourcing your accounting is an option and may be what your business needs starting out. Contact Touché Financial Solutions to manage all of your accounting needs.
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