Money is the lifeline of every business. You need it to run your business efficiently, pay yourself, and grow your business. As a business owner, taking control of the inflow and outflow of cash in your business is one of your key responsibilities. It is one of the many hats you need to wear to have a successful and thriving business.
A stable financial system can help you avoid problems with your business finances.
What is a financial system?
This is simply how you control the flow of money into your business, how much you retain for future business growth and investment, and how money flows out of your business.
Here are five reasons why you need to stabilise your business finances:
It improves decision-making.
Running your own business is a make it or break it ‘kinda’ thing and the decisions you make matter. One wrong decision may lead to failure. Understanding your financial system gives you insight so you can set the right spending priorities and avoid going into debt.
It helps you pay yourself without guilt.
Some business owners struggle with paying themselves as they worry about not being able to cover their business expenses the following month whilst others ‘overpay’ themselves and struggle the following month. The challenge is that there is no VISIBILITY. Having a stable financial system means that you have clarity about your future cash flow and you build a cash reserve that ensures that you can get through lean months.
It facilitates growth.
Being able to manage your business finances systematically allows you to build a cash reserve which will increase your ability to respond to opportunities to scale up. It can be frustrating when you have an idea or get presented with an opportunity to grow your business but you don’t have the means (cash) to take advantage of it. Access to cash is key to gaining competitive advantage – that’s why a lot of millionaires are created in a recession.
It helps to maintain or improve your credit record.
Although your personal credit rating and business credit rating are different, for some small business owners, the lines can be blurred because the business relies on the owner’s credit rating. Good credit rating gives you access to good lines of credit with suppliers, banks and other lenders.
With a stable financial system in place, you are less likely to have bad debt and hence your credit record is protected (or even improved). This is because you will have control of your cash flow, have foresight of potential financial problems and have time to take action to avoid missed payments and defaulting on financial commitments.
It helps lessen stress.
This is most people’s top goal – to run their businesses with less vulnerability and less stress. When you have a stable financial system, you feel less reactive to the demands of your business or worry less about the future of your business. You can be present in the ‘now’, knowing that you have a good grasp of the journey ahead and are prepared for uncertainties.
Every business owner’s ultimate goal is to have a stress free, thriving business. A good financial system will help you achieve this.
If you need help with your business financial system, get in touch with Tayo Salami – firstname.lastname@example.org.