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Robert Altomare

Mastering the Money Game: 3 Financial Strategies Every Small Business Owner Should

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Ever feel like you need a crystal ball to manage your business finances? Better question: DO YOU manage your business finances?


Well, if you answered yes to the first question or no to the second question, you're not alone. Many small business owners find themselves walking a financial tightrope. So many times small business owners ignore their financial statements wrongfully thinking:


"I’m busy, how could my business be struggling?"

Or worse yet, they GET financial statements from their bookkeeper, but they are mystified by what the numbers are telling them.


But here's the good news: with the right strategies, you can turn your financial headaches into your business's greatest strength. I can’t tell you how many times my clients were woefully under-educated on the ins and outs of the financial management of their own businesses. And who can blame them?  Many of today’s business owners were never taught business skills in high school or college!  I put the blame for this squarely on our education system and I have made it a personal mission to fix this issue, one small business owner at a time.  This was the primary reason I wrote The Tradesman’s MBA in the first place.  It’s not enough that people start businesses; we need them to be successful!


So let's dive into three simple game-changing financial tactics that could revolutionize your small business and make it the efficient powerhouse it can be.



Cash Flow is King: Master Your Cash Flow Forecast

Predict Your Financial Future for Great Financial Strategy

Did you know that 90% of small businesses fail in the first year?  And did you know that 82% of those small businesses fail due to cash flow problems? Don't be a statistic!  And here’s the secret that those scary statistics don’t tell you: businesses don’t fail because the idea was bad, the value proposition was poor or the ‘state of the economy’ was challenging.  Savvy business owners SEE these issues and navigate around them. No. Small businesses fail due to a lack of knowledge about how to interpret the financial gauges of their business: the Cash Flow Statement, Income Statement and Balance Sheet. Some are successful at it, some are not. But the point is that you can’t manage your business if you don’t know your numbers.


Cash Flow Management Tips:

  • Create a 13-week cash flow forecast

  • Update it weekly for accuracy

  • (Most Importantly) Identify the causes for variances and eliminate those causes!


Pro Tip: Many business owners get caught up in the day-to-day operations of their business that they get stuck in the mud and down in the weeds that they fail to see the big picture. Combine this inability to get out of the weeds with a general lack of awareness of what the numbers are telling them and you get a business that is on autopilot heading straight for a mountain. And that’s exactly where it will go, too, because those mountains MOVE! The conditions of a market are constantly in flux requiring your hands on the controls and eyes on the gauges at all times. You need to be working ON your company, not IN it.

 

Embrace Cloud Accounting: Your Financial Command Center

Real-Time Financial Insights at Your Fingertips

Gone are the days of dusty ledgers and confusing spreadsheets. Welcome to the era of cloud accounting! And it is here that I am particularly vocal to business owners I work with. What I have seen many times is that small business owners rely on their very superficial understanding of accountants and accounting to get them through the year.  And honestly, this is unfair to accountants.


I consider accounting to be a process with individual players at each step of that process.  At the end of that process is the tax preparer.  The Tax Preparer is there to do exactly that: take your financial statements and prepare and file your taxes for the year. Yes, you can usually obtain good tax planning assistance as well from your tax preparer, but I would recommend you make sure you are speaking to a Certified Public Accountant (CPA) or similarly-credentialed professional to help you there.


But who creates those financial statements? That is the bookkeeper who is at the front of that process.  The bookkeeper is the person responsible for tracking and managing, on a day-to-day basis, all the individual transactions your business executes.  Cash in, cash out; they see it all and categorize each transaction as revenue or expense to help build those monthly financial statements. 


The whole point I’m making here is that many people mistake a bookkeeper for a tax preparer and vice versa.  Generally speaking, you should only need to talk to your tax preparer once a year (if you file annually). Otherwise, the grunt work of day to day management of your books should fall either to the bookkeeper or the small business owner themselves.


And what tool do they use?  For the bookkeeping services BreathEasy Consulting provides, we use QuickBooks Online for all our clients. It is a cloud-based service that allows both the bookkeeper and the owner access to their books for up-to-date reports and insights. It is exceedingly easy to use and a game changer for managing a business. We believe so strongly in this that we will transfer any client not on QBO at the time we take them on as a client to QBO.


Cloud Accounting Benefits:

  • Access your finances anytime, anywhere

  • Facilitates tedious bookkeeping tasks

  • Generates instant financial reports


Pro Tip: Popular options include QuickBooks Online, Xero, and FreshBooks. Choose one that fits your business size and complexity. My personal experience is that QuickBooks Online is very capable and it will be a long time before your business outgrows it.

 



Financial Metrics That Matter: Know Your Numbers

 If You Can Measure It, You Can Manage It

Tracking the right financial metrics can give you x-ray vision into your business's health.  And this is where many small business owners miss.  I’ve seen that many small business owners use their Financial Statements like a gas gauge in their car, “this is how much gas I have left at the end of the month.”


But what they were never taught is how to interpret their financial statements using specialized ratios and formulas and statistical processes. Returning for a moment to the gas gauge metaphor, we can see that the gas gauge is a direct measurement of how much gas is in the tank. Great.  We also know that, when we bought the car, the dealership promised us performance such as miles per gallon. Also great.  And most car owners, like business owners, stop there. They read the numbers and gauges never realizing that more information is hidden within just those two numbers. 


When we compare these two numbers and add a time component, we can see how many gallons were used up and infer miles driven that month. And from miles driven, we can estimate when our next service interval will be.  And when we measure how quickly we reach those service intervals, we can estimate wear and tear (life expectancy) of the car itself.  All that from a simple gas gauge. 


The same is true with business! There is an immense number of formulas and ratios available to the small business owner to determine his business’s performance and take steps to improve it. The Tradesman’s MBA goes into great detail about many of these measurements and their importance to the small business owner.


Key Metrics to Watch:

  • Gross Profit Margin

  • Net Profit Margin

  • Current Ratio (Liquidity)

  • Accounts Receivable Turnover

 



Bringing It All Together

Remember, financial management isn't about being a math whiz. It's about using the right tools and strategies to make informed decisions. By implementing these three easy strategies, you're not just managing money – you're setting the stage for sustainable growth and success. Ready to take control of your business finances?


Sincerely,

R. Altomare

Founder, BreathEasy Business Coaching and Consulting

 

The Shameless Plug

If you'd like to learn more about this and other key topics that help you manage your business efficiently and successfully, may I recommend The Tradesman's MBA? It covers all the topics you need to operate your small business effectively and efficiently. Planning, Strategy, Finance, Accounting, Inventory Management, Marketing and Project Management are all covered to help you avoid costly mistakes.


And, if you'd like to learn how BreathEasy Business Coaching and Consulting can help you lower your costs and keep more money in your pocket, please fill out the contact form on the homepage and I'll reach out within 2 business days to discuss your particular challenges.




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