January is Financial Wellness Month, so along with all the normal New Year's resolutions about health and weight, January highlights the state of your finances. It's my experience in working with hundreds of self-employed small business owners that money and their business finances are not usually top of mind. In fact, I'd say that at least half the self-employed business owners I know actively avoid talking about or monitoring their money. I've seen self-employed people ignore their financial picture pretty much altogether, until they get into a severe financial crisis.
We're in business for ourselves so that we can do what we love to do in service to others. And the phrase “in business” means that we intend to do what we love in such a way that our customers will be served and we will be profitable. Not many of us can claim that we don't need to make money in our business, yet when I sit down with clients I often find that they've ignored the financial wellness of their business. I hear wishful thinking type statements like “oh, I figure the business end of things will take care of itself” or “I don't want to get tied down paying attention to the details of business” or even “I just don't have a head for business.” Excuse me? This type of head-in-the-sand behavior reeks of magical thinking, and it can lead you lose your business.
Here are some of the common symptoms of financial disease in a business.
- Poor cash flow which is solved by running the business off of personal credit cards.
- No sense of what percentage of income is needed to cover your operating costs.
- Bookkeeping which is months behind because the owner insists on doing it herself to save money, or refuses to consistently turn receipts into her bookkeeper.
- Quarterly taxes are unpaid.
- No basic budget pulled together that gives a guideline for things like travel, conferences, or new equipment.
- No regularly scheduled weekly time to review your income and expenses to date.
If any of these sound familiar to you I urge you to work on the financial wellness of your business every bit as hard as you work on your own physical wellness. Here are the basics that I recommend for every business owner.
- Hire a bookkeeper before you open for business, and get one that specializes in small business bookkeeping. Be faithful in turning in your expenses and income to her so that your financial picture is up to date. If you do not have a bookkeeper and you're in business go get one right now!
- Review your income and expenses statement at a set time each week. I personally like to do a quick review on Friday morning, to see what income I've had and from what source as the week draws to a close. You might prefer first thing in the week – it doesn't matter, just do it consistently, once a week.
- Have your bookkeeper tell you what percentage of your income goes to operating costs on a quarterly basis. Keeping your operating costs under control is the single simplest way to give yourself bigger income from your business.
- If you do use a credit care to buy supplies or travel for your business make sure that you have a business credit card, don't co-mingle your personal and business funds.
Of course, there are many other topics about managing your money that are important to a business owner. But if you need to improve your financial wellness just taking the four steps I list above will get you on the right track. You can start right now and by the time Financial Wellness Month is over you will have improved your business substantially. Keep in mind that what we pay attention to improves. So paying appropriate attention to your business finances will actually improve your bottom line, and it will help you step into being a true businesswoman, too.
If you find see yourself in the “symptoms” list and need support to take the first step, you can invest in a One and Done hour with me and I'll help get started. To find out more about that, just click here and you'll get all the details.