Five Important Benefits
With improved knowledge of your company’s financial situation come numerous benefits for you as the owner. Here are five important benefits that come from being financially savvy about your business.
Adjust While You Can – In situations where your receivables are outstanding for longer than you expected, knowing your numbers will allow you to address your payables situation head-on. You can either develop solutions to better address getting customers to pay or you can talk to vendors about extending terms making arrangements to pay your bills in incremental payments.
Make Informed Decisions - There is an adage that "We manage what we measure.” Business owners must decide what key performance indicators and key ratios will determine their financial health and overall business success. You don't know how your business is really doing unless you know which aspects of your financial health to watch and which data will in turn drive your informed decision-making.
For example, in a restaurant, labor and food costs need to be monitored daily to allow the business owner to make decisions to drive profitability and strengthen and overall performance. Whether it’s buying another company, managing your cash flow or hiring a new employee, knowing your company’s financial health can help you make smarter decisions for your business.
Avoid “End-of-the-Month” Surprises – For some business owners, a financial surprise can have serious adverse effects on the health of the company. Take time to build daily dashboards around the key metrics discussed above to ensure that "in-month" adjustments to business plans, cash flow and accounts payables can be made around real-time business conditions. Better financial management means a clearer picture of what’s ahead for your company and fewer surprises.
Earlier Detection of Fraud and Waste – Paying for unwanted services, double-paying bills, employee theft and outright fraud are all issues even the savviest small business owners will likely deal with at some point in their business lifecycles. You can mitigate downside risk by reviewing your financial statements on a routine basis to identify abnormalities
Sleep Better at Night – Most small business owners reference managing cash flow and keeping track of expenses as the top pain points that keep them up at night according to a recent Visa study. Financial intelligence is one of the best remedies for dealing with stress in a small business.
Download the eGuide for more tips and advice to help your business including seven financial terms you should know, three ways to check your financial health, and three steps to outsourcing your financing!