Business owners probably lose more sleep worrying about money than the average person. Where is your money going? It’s a question that an entrepreneur needs to be able to answer with clarity. Knowing where your money is going will also help you sleep at night and will help you realize whether you need to make changes, where and how quickly.

    Businss owners need to understand income and expenses. You may not need to do all of your own bookkeeping, but you do need to know your profit margins and you need to know the bottom line on income and expenses. You should never be clueless as to how well — or how poorly — your business is doing.

    Where Is Your Money Going?

    You need to be fiscally knowledgeable. Ask your bookkeeper or accountant to explain your business finances to you and understand it — even if only on a surface level.

    Here are items you need to know inside out to be a successful entrepreneur.

    1. Who is responsible for your finances? Have you spoken with your bookkeeper or accountant recently? If not, you should make a plan to do that as soon as possible. You need to know who has his or her hands in your bank accounts, what is going on, who is being paid, who is paying you and whether you’re profitable.
    2. Do you have a financial cushion? If you suffered an income shortfall, could you bounce back? Do you have the financial resiliency necessary to continue forward in a difficult month or two? Do you have a financial advisor who will alert you if you need to course correct in the event of a financial crisis? How will you keep the lights on?
    3. Spend time monthly reflecting on the previous month’s income and expenses. What is your cash flow? Do you need to drop prices or increase prices to keep up with increases in costs from your vendors? Is your budget too tight for comfort? If one bad month will lead to your business’s demise, you need to make some changes as soon as possible. Your budget is a living, breathing entity into which you need to have clear insight.

    Bottom line: You are responsible for your business and its success and its income and expenses. This means you need to know what is going on. Don’t shut your eyes to your financial responsibilities.

     

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