If you want your business to succeed, it’s not enough to leave it in the hands of your accountant, writes Brad Turville, director and business advisor at BJT Financial. Here are three common mistakes business owners make when it comes to their finances.

As a sweeping generalisation, larger businesses have a greater understanding of their numbers and have put financial systems in place because they’ve had to. Generally, to make it that far, they’ve had to move out of financial ‘cowboy’ country.

Specifically looking at small business growth from <$1M to $5M turnover, I often find the accounts of businesses in the <$1M to $2M range are an absolute mess. They often have terrible bookkeeping standards, they see their accountant once a year, they don’t have any advisors to help support and guide them, and I regularly hear things such as “my accountant looks after that” or “my accountant will sort that out at the end of the year”.

That mentality is very likely to get them into trouble.

I know because I see it all the time. We call them ‘rescue missions’ and the client is always of the opinion their accountant has been looking after it for them. If this rings any bells for you, I’m not saying that you need to become an accountant, but you do need to give your finance department some love as it is a mission critical component of your business.

To reconfirm how important your numbers are, the top three ways I work with business owners are: Strategic Planning, People Planning and Knowing Your Numbers.

Why is knowing your numbers so important?

The top three reasons for business failure are:

• Poor financial control, including lack of records
• High cash usage
• Poor strategic management of business

Can you see why I focus on the above three projects?. So logically, if poor financial management is the top reason businesses fail, do you think you should give that space some love and attention? This includes making sure you have good financial controls in place, good record keeping procedures, and advisors to provide strategic guidance to your business.

You haven’t worked this hard to lose it all over something like that when instead, you can take control of your numbers and work proactively with your finance team.

If you are not a born ‘numbers person’, surrounding yourself with a proactive business advisor who can guide your business through this important growth stage will be key. Ask them to teach you and help you build confidence in this area. Request their expertise to point out threats and opportunities, guide you with decisions that will impact the finances of the business, and help you navigate the rough seas of business.

If no one is staying on top of the numbers, then it is only a matter of time before it all goes south. It’s not a question of if, but when.

One of the best tips I can give you is to hire a gun bookkeeper because their services provide the foundation to reporting, accounting and advisory. In short – if the numbers you are using to make decisions about your business are wrong or unavailable, or cannot be provided on a timely basis, that will lead to unreliable decision-making.

Understanding your business financials

Knowing your numbers involves looking at ways to grow: where cash is locked up, identifying symptoms before they become problems, optimising assets, cash forecasting, budget vs actuals, KPIs, how much to pay yourself as a salary, what funding is required, driver analysis, scenario/what-if analysis, and pricing/product mix/volume. These are just a few ways I have helped clients make better decisions and get better results.

So, if you are turning over >$500,000, I strongly recommend you invest in expert bookkeeping services that keep your books up to date once or twice weekly, so you are really on top of the numbers. The cheap bookkeeper from down the road might have been okay while you were starting up, but once you grow to this level and above, you need to upgrade.

The better you understand your business, the easier it will be to make more money. So, to help our clients get on top of their numbers, we provide Profit Improvement Programs, Cashflow Improvement Programs and Virtual CFO Programs to enable business owners to fully understand, interpret and improve their numbers.

The focus of each meeting will change and progress depending on their needs and objectives. It makes a huge difference to the calm and confidence our clients feel making good, well-calculated decisions that enable their business to grow.

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