Are you wasting time doing your finances?

 

It’s no wonder most small business’ hate doing their finances – it’s one of those tasks that you know you must do but just can’t see the benefits. Plus, there is always something better to do- it’s a bit like doing the ironing!

It’s no wonder most small business’ hate doing their finances – it’s one of those tasks that you know you must do but just can’t see the benefits. Plus, there is always something better to do- it’s a bit like doing the ironing!

I hate ironing. I used to have a routine, every Thursday I would put “Morse” on the TV and do the weekly ironing. Two hours and I was done.     Now it just builds up and up until eventually I crack. I find a film (or two) and iron for hours on end.   At least at the end of this mammoth session I get a useful outcome – I have clothes in the wardrobe to wear and an empty laundry basket.

I have yet to find anyone who loves ironing for itself – I probably know the wrong people.   I do know people who have a good routine to which they stick.

It is the outcome I would like to challenge – after all I would not need to do the ironing if I didn’t need the clothes to wear.  I certainly would not add it into my weekly routine if I didn’t need the result.  It’s the same with your finances. You need to think of the outcome you’ll achieve from keeping your books and working on your tax return.  You get that feeling of relief when you press the button sometime in January to submit your tax return.   You may also get a big tax bill that you desperately need to find the money for at a time when you are still reeling after Christmas.

Traditional accounting looks at your total turnover, expenses and profit.   If you only use your figures for your tax return, then this is as far as you need to go.   But what else can you do with the numbers?

Turnover             Usual for categorising businesses and judging performance

Expenses             A measure of how good you are at getting the business to pay for everything

Profit                     A measure of how much you can take out of the business, but is very subjective

How much time and money have you invested in getting to this conclusion?  Do you feel you got your money’s worth?  And what happens now?

Pay the tax, file the bits of paper,  and forget about money until next year?

This approach is a bit like the ironing and then carefully putting all the clothes in the cupboard and only wearing sports gear that doesn’t need ironing.    What if we were to wear our finances?  What if we could use all that information we have painfully gathered – whether in a weekly routine or a mammoth binging session?    Why not use this information to drive our businesses forward?

Consider the following questions:  Who are my best customers? How much does it cost to win that new bit of business? What products or services bring in the most money?  What am I spending and why?   How much cash do I have available to invest in my business?

Can you answer these questions from your current accountancy processes?

Don’t waste your time getting your finances half done.  Finish the job then use the information, know your numbers and grow your business.

And always remember that if you hate it that much you can always outsource– just like the ironing.