Financial awareness is all about understanding your money and knowing how best to manage it based on your circumstances.
For some business owners, keeping track of your spending might sound time-consuming. It may even worry you, if finances are a cause for concern and delving into them feels stressful. Yet if you take five straightforward steps, you can get a clear picture of your business’ income and outgoings, keep track of KPIs to check you’re meeting targets and feel informed and in control.
1) Check your bank account every day
Keeping up to date with what you’re spending and when is crucial. The simplest and quickest way to do this is by logging in to your bank account every day, checking not just your overall balance but your latest transactions.
Thanks to mobile banking apps, viewing your bank account is easy, secure and takes only a minute. It’s worth it to make sure you keep spending on track, manage your incoming and outgoing invoices and clearly understand every transaction that’s showing on your account.
2) Use automated systems
We automate so many parts of our lives these days, from the cars we can drive to turning the lights on in our homes. Our finances should be no different.
Automatic banking makes our lives less complicated. Yet it also gives us the clarity we need to be financially aware of. A cloud accounting system like Xero, which I recommend to my clients, links invoices to your banking feed, automatically updating profit and loss figures based on real-time transactions. That way, you can get a clear picture of your business balance whenever you need it.
3) Know your ‘breakeven point’
Knowing how much net profit you need to have in your business to avoid making a loss is vital. It helps you keep track of your outgoings to avoid overspending and gives you an income target to meet each month to stay in profit. You should also know how much money you need to take out of the business to cover your personal expenses. This amount is then your net profit target.
If you know your numbers, it saves you much stress, worry and hassle in the short and long term. It’s proof that, for most of us, financial awareness and peace of mind are deeply connected. If we take a few simple steps that give us a clearer picture of what our financial situation looks like, we can sets targets to manage it, stay ahead of any unwelcome surprises and enjoy our successes as our business grows.
4) Set up dashboards
A financial dashboard is a great money management tool. You can set one up to focus on the key numbers in your business, giving you an instant snapshot of where your money is going.
With a dashboard, you can track KPIs, targets and sales. You can also link to team members’ accounts, so you’re well-informed about upcoming expense submissions and cash owed. Then, you can stay ahead of what costs are coming up.
5) Decide what’s important to you
You might not link your values to financial awareness. Yet understanding what really matters to you and your business is vital, as it helps you focus on the spending that makes a real difference.
Decide what means the most to you and your business so you can focus on the financial transactions that will get you to your goals. Whether it’s a target to achieve a certain turnover, employing new staff or taking on a new facility, you’ll know exactly what your finances should look like in order to achieve it.
For an objective overview of your business’ finances and support to help you, whatever the situation, I’m happy to have a confidential chat.