Major Killer of Businesses: Lack of Basic Knowledge about Finances

Have a great idea for a new business start-up?

Or just commenced your start-up business?

Here are some wise words to ponder over:

“I believe the number one killer of most small businesses is a lack of money. The second biggest would be a lack of basic knowledge about finances. Most start-ups are seriously underfinanced and most initial sales projections are significantly over-estimated. The initial costs for a start-up can be staggering. Sales growth and turnover will, almost without exception, be far slower than expected. If you are going into a new business, go in with your eyes wide open. It’s no good once you’re half way in to realise that you really can’t afford it. Financially committed, with a half-setup or half-renovated business is no place to be.

Financial knowledge is essential. If you don’t have any skills in that area, hire some! Understanding how you can have money in the bank and still not be making a profit makes all the difference to survival. This means taking it easy on the personal toys, capital expenditure and renovations in the first few years. A big, unexpected tax bill or bad debt could wipe you out, so make sure you keep an eye on the finances.” – David Staughton

 

If you need assistance with forecasting, budgeting, cash flow management, bookkeeping, maintaining and understanding your financial records, contact us today. We can help you to make sense of the numbers and set up a plan to take control of your finances.

Make Your Money Work for You

Are you a business owner who is always struggling to make ends meet? Are you wondering why your sales turnover is high but as soon as your customers pay you, the money goes out straight away to pay your suppliers and your staff. Then there’s hardly any left over to pay your taxes and BAS obligations to ATO, much less, to yourself.

You’re not alone. There are many other business owners in your shoes, also grappling with this issue of cash flow and money.

In his book, ‘You Call the Shots’, Cameron Johnson shares the following thoughts about making your money work for you.

One of the most important qualities of the most successful entrepreneurs is that they appreciate the true value of money and pay close attention to how they manage it. Good money management isn’t a minor detail; it’s often the difference between lasting success and the kind of success that quickly crumbles into failure.

New entrepreneurs often make the mistake of thinking that the purpose of building a business is to make money. But money isn’t an end to itself; it’s only a tool. At first it’s a tool to help you build and grow your business further. Later, once your business is off and running, it becomes a tool for building financial security and retirement. It also can become a tool for starting additional new businesses. The key point is that your money is a tool for accomplishing what you want to accomplish – and that only happens when you control it. If you take care of your money, your money will take care of you.If you don’t, it can enslave you.

If you want to successfully start and grow your own business, you need to have a firm grasp on basis money management skills. This is something you cannot delegate to people you hire, and even later, if your business grows large enough to warrant an accounting staff, all the really important financial decisions have to come from you – and you can’t make those decisions clearly unless you have a solid grasp of how your cash flow is running.

So many I know don’t think about how they’re managing their money or their credit.’ As soon as they get a pay cheque, they spend it. They find themselves with credit cards with a $5,000 limit, and the next thing you know, they’re paying the minimum payment – “Hey, it’s only $30 a month” and they’re $8,000 in debt. What they don’t realise is that by not being in control of their money, they’re letting their money control them – and that can have long range consequences.

That kind of debt is the entrepreneur’s worst nightmare.

The biggest problem in business today is that people spend more than they have; they let expenses grow more than income; and they try to become too big too fast. This is no different from the way so many people overextend their credit cards, just on a much large scale.

And here’s the thing: the basics of cash flow are simple. You don’t need a business course to learn this. You just need to be determined to stay on top of your finances and make your money work for you.’

 

If you need assistance with forecasting, budgeting, cash flow management, bookkeeping, maintaining and understanding your financial records, contact us today. We’ll help you to join the dots to make sense of the numbers and set up a plan to take control of your finances.

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