When you start out in business it can be really easy to manage your finances as they’re so simple. This often lulls business owners into a false sense of security as the business grows and the finances become less manageable. This video talks about why having accurate reports are essential to growing and scaling a business.
Why businesses need to keep a close eye on their numbers
If you think back to when you actually started your business, it was probably really, really simple. So you might have had a couple of customers, them, paying you £100 each. So you had £200 coming in, and you might have had a few expenses, which were £10 each, so you had about £50 going out. And that would’ve led to £200 in, £50 out, £150 profit, really easy to understand. And then if you fast forward that a couple of years ahead, and then those two customers probably turned to 20 customers, they’re all paying slightly different amounts. And that handful of expenses probably turned into 50 different types of expenses going out, subscriptions, salaries, all that kind of stuff.
And where a lot of business owners go wrong is, the fact that when they start their business, their finances are so simple that they can just manage it in their own minds, lulls them into a false sense of security. Because as that business starts growing and scaling and all of those expenses and incomes start getting more complicated, often the assumption that these business owners have in their mind that they can still keep track of everything, it does not switch over quickly enough to their new reality, which is, there’s just too much going on for them to actually keep track of.
So this is why businesses need reports to tell them how they’re actually doing because if you’re a average business owner pretty much any business owner, it’s almost impossible for them to just keep track of every time your thing in and out. That’s what these reports do. And reports can look ahead as well as historic. So a report, like a profit and loss can look backwards and say, okay, well, last week you had X amount of money that came in and X amount that went out. So your overall profit was this. And you can have reports saying, well, if you keep doing what you’re doing for the next two years, three years, this is what your bank balances will look like. This is what your profits will look like.
So the reality is, the reason businesses need good reports and need to be looking at their numbers is because as the business grows, it just gets too complicated. Sometimes if the business owner is switched on, they can keep their bookkeeping up to date all the time and then run a report every week to just see how they’re doing, but in most cases, they won’t be able to do that because they’ll just be too busy. And you know what? Weekly is ideal if you can do it yourself, but at the very least monthly, because when you’re looking at your numbers monthly, it means if things do start to change, if things do go wrong or need to be addressed and proactively addressed, you’ve got enough time to do it.
Don’t think I’m being unrealistic when I say weekly, that’s an ideal solution, but looking at your reports monthly is still very, very good. But ultimately, what it means is you understand what’s happened in your business. You’ve got a good understanding of what’s going to happen in your business and the behaviour of your business. It means you can take action quickly when the action counts rather than retrospectively, when often it’s too late or very expensive to fix things.
So just so you know, as part of our Apex program, we give our clients a report pack and we keep all their bookkeeping up to date for them. If keeping your records up to date is something you’re struggling with, if you’re not sure about what your numbers are, come and talk to me, and we can talk about how we can actually get you the numbers that you really need to drive your business forward by booking in a strategy call.