If you said poor financial management, you are right on the money. And hopefully that’s true in your business, too (being on the money, that is!).

Strategic financial management is the way your business will make money. Get it wrong and the chances of your small business surviving for a long and successful future are, unfortunately, very slight.

The fact is, though, most business owners launch their business without the basic back-up of sound financial management. They have no real financial plan or even any strategic system to help them monitor and manage their finances. 

The next step? They run out of money and don’t even realise why – or how they could have prevented it from happening.

There is a well-known saying that, if you fail to plan, you plan to fail. It’s true.

In terms of your small business, if you do not take the time and effort to create a solid financial plan tailored to your business, you are, sadly, simply setting yourself up for failure.

You wouldn’t hop in your car and expect to find your way to your desired destination without the address programme into your GPS, so why would you expect your business to magically succeed without its own roadmap?

To stop navigating blindly, business owners need to take some responsibility and form a plan. Not sure how to do it? Experienced business coaches and/or accountants can help.

In accounting terms, a smart accounting system is a great start and provides you with all the important information you need to run a well-managed business. If the finer details are beyond your understanding, your accountant or bookkeeper can help set them up for you and provide regular financial reports.

What must you do yourself? Take the time to understand them. The story behind those numbers is the story of your business.

Seem too confusing? Get your financial specialist – your accountant or bookkeeper – to put it in language that isn’t overwhelming to help you make the right decisions to suit your business.

Main Financial Reports:

• Profit and Loss Statement – Outlines the profit your business makes by outlining your expenses and income.
• Balance Sheet – Shows your assets and liabilities (what you owe to other parties). The most important document in any business owner’s life.
• Debtors and Creditors’ Reports – How much you are owed – and how much you owe your own suppliers.
• Budget – An estimate of the income and expenses within a defined time period.
• Cash Flow Forecast – An estimate of business inflows and outflows of cash within a defined time period.

Running a business well is about learning and listening to those with more specific knowledge than you. By surrounding yourself with experienced and professional experts in certain fields, you have a much better chance of helping your business thrive. The steps you can take by following sensible advice can make a huge difference in the life of your business. Knowing your numbers is always a smart start.

Lisa Stoneham is a qualified accountant and bookkeeper, helping her clients make more money with less effort. Lisa has been managing business numbers since 2005, and in July 2015, she realised her dream to run her own business when she started Straight Forward Accounting Solutions. You can connect with her on LinkedIn.