Posts Tagged ‘leadership skills’

Making Money is Only Half the Battle

Sunday, February 26th, 2012

There is a lot of information in the business world about Making Money — there are Sales Gurus all over the Internet — touting their solution to selling and Marketing Gurus also advising you on how to generate leads. And yes, you should listen to the ones that resonate for you. I do.

However, you can be a powerful sales person and an extremely effective marketing person and still struggle building your business.


Because you don’t want to be bothered with the financial aspects of your business. You hand over the financials to a bookkeeper or your CPA and you trust that they will take care of the most critical aspect of your business.

And they will. To an extent. They will make sure your entries are correct in your accounting software. They will send out invoices. They will pay bills. They’ll figure your taxes.

I have several examples of business owners who abdicated all responsibility of their financials over to someone else only to find out later they were in a world of hurt. One bookkeeper decided to not pay quarterly taxes. When the business owner received the tax bill of thousands of dollars in back taxes and penalties, the bookkeeper was fired. And the business owner almost went under trying to pay off the debt. Who is really at fault?

Another business owner found out their bookkeeper was skimming off the top, writing checks to bogus companies and depositing the funds into a personal account. Another example of a business owner abdicating authority to someone else when it came to the financial aspects of their business.

These are the stories that make you cringe. And they are so preventable.

There is nothing more important for a business owner to understand then the financials of their business.

You don’t have to handle all aspects of those financial pieces. However, you do need to understand what is going on and you have to direct the activity.

This responsibility for a business owner never stops. The level of involvement changes. But a business owner can never step away from understanding the financials of their business.

Two critical financial concepts every business owner should focus on from day one:

1) Understanding how your company is going to Make Money:   This is all about intentionally determining what your product or service is going to cost you to produce, understanding at what volume you’ll have to sell to breakeven and setting out a 12-month profit plan in order to stay ahead of problems and capitalize upon successes.

2) Understanding your cash flow cycle and managing Cash Flow:   All businesses are not equal when it comes to their cash flow cycle. Some businesses collect money when they sell a product or service. Their cash flow cycle is at point of sale. Other businesses collect a set amount up front and collect the remainder when a project is completed. Their cash flow cycle could be 30 – 60 days or more. Running cash flow reports at least every 2 weeks when a company is getting a handle on receivables and payables is critical.

If a business owner attends to these two financial priorities, he or she will set in place a solid and predictable foundation on which to build a successful business. Anything less is a disaster waiting to happen.