Elsa was sitting on a beach chair with her toes buried in Hawaii’s black sand when her phone rang. It was Anna, the manager of her snowplow business, Ice Busters:
“Elsa, we’ve run into a problem. We just had a heavy snowstorm and two of our snowplows just went down. It looks like there is no money in the bank to make these major repairs… Do you want us to find a line of credit to get back up and running? We can’t fulfill our private parking lot contracts without those trucks.”
Ice Busters has been running so smoothly over the past few years, taking a warm weather vacation in January seemed like a great way to relax and melt away the stress of Elsa’s demanding business. The problem is, she has never kept a close eye on the cash flow coming in and out of the business each week. When she decided to head to paradise, she left the business vulnerable to a crisis because she wasn’t paying attention to the business’ finances.
Establishing healthy financial habits can prevent your business from slipping on black ice and landing in a ditch without a rescue plan. I’d love to serve as your financial weather forecaster, helping you prepare and establish good habits before bad weather strikes. Contact me today to learn more about what financial habits and preparedness routines make sense for you.
8 Financial Habits Every Small Business Owner Needs
Just like a pop-up winter storm, your company’s finances can blow sideways in a hurry. If you aren’t paying attention, it can be disastrous for your business. Here are a few financial habits that I suggest for all small business owners who would like to be prepared:
1. Establish a routine for financial check-ins. No matter how long I’ve been working with a client, whether it’s one month or several years, we always take the time to discuss financial statements each and every month. As a business owner, you should never stop looking at your financial statements because it tells you how well you did or did not do in the previous period. Looking backwards is the first step in having a good financial forecast.
Pro tip: It’s easier to talk about your financial statements if they are cleaned up and accurate. You might need a lot of work on the books before you can accurately and efficiently review them.
2. Set aside time for financial education. No matter how much you know, there’s always more to learn. Reading your statements every month is one way to educate yourself about your financial status. When partnering with me as your Fractional CFO, education is always the first phase of working together. You’ll learn how to make better business decisions based on reading your financial reports and statements. Build a strong foundation of the basics so you can build on top of it.
3. Know your current cash position every week (or every day, if things are tight). Mismanaged cash flow can put even profitable businesses OUT of business. Don’t be like Elsa and her snowplow business: ignorance is not bliss. You need a strong understanding of your cash situation at all times. From there, project your cash needs for next week (or beyond!). If you aren’t sure how to project your cash needs (don’t worry, most people don’t!) I can help you do this. Reach out to me today to start the conversation.
4. Forecast your revenue based on changing situations. The best way to begin this is to track your leads and customers in your sales pipeline so that forecasting revenue is a possibility. If you don’t track this information, then you can’t do projections.
5. Budget for revenue and expenses to stay disciplined. Sometimes expenses can get away from you… let’s say you buy a monthly subscription and then forget to cancel it after you decide that you don’t like it. If you budget, you will pay attention to each category in order to hit your financial targets, which means you’ll notice if something isn’t right. There is a lot of pressure to say yes to buying a new software or subscription – a budget helps you say no when you need to.
6. Brainstorm for new potential revenue sources or lines of business. At least annually, take a look to see what else is out there, what your competitors are doing, if there are new products that customers are looking for, etc. Pay attention to the business landscape around you so that you can jump on new opportunities as they become available.
7. Plan ahead and save up for large expenses or cash outflows. Elsa should have expected to have repair costs during their busy season. If she did, she could have saved money each month during the previous year so that it wasn’t a scramble to find a way to pay for it when the time came. Other examples of big cash outflows include business insurance and taxes. As much as possible, set a cash flow budget, plan ahead, and save up so you don’t have to finance it.
Pro tip: It can be expensive to be in reactive mode instead of proactive mode when it comes to money and spending. Reactive financial decisions result in limited choices and not ideal options for solving a problem. If you plan, are educated, and have a good understanding of your cash flow and statements, you can be proactive. Planning in advance is always the cheaper option.
8. Seek out experts who can help you. Outsourcing roles and responsibilities on your team (like a Fractional CFO!) is a great way to maximize your business’ efficiency. I can take a look at your financial situation and help you decide where it makes sense for you to outsource roles, and when you should hire an employee.
Looking To Strengthen Your Financial Habits?
Accountability and expert guidance is all you need to master the habits you wish to strengthen. I can help you with both! Contact me today to learn more about how a Fractional CFO like me can help you and your business flourish.