In this episode of the Unstoppable Success Coaching podcast, we are discussing 9 tips to getting your financial house in order. As we run our businesses, it’s easy to get caught up in the flow of the things we like to do or the things we think are fun to do.
For me, I find that the tasks I tend to avoid the most are those having anything to do with accounting. Whether it’s paying bills, creating invoices, budgeting, or financial projections, I know for a fact that I’m not alone.
But consider this, the financial well-being of your business – whether you are an S-Corporation, Limited Liability Company, or a Sole Proprietorship – is critical to your unstoppable success.
Now over the years, I have developed some practices that have been helpful to me. They are practices that have saved me money, time, and have kept me out of trouble with my creditors. These practices have also helped me weather economically unstable times and we’ve had a lot of those while I have been a business owner. And I think, dealing with an economy that is unstable or at the very least is vulnerable to world conditions is here to stay, and we need to be prepared to manage and run our businesses based on sound and tried and true financial practices.
So let me share some of these with you:
1. First of all, I open my bills the day they arrive. I go through the mail each day and put all of my bills on a pile to be dealt with on the day that I normally pay invoices. If I see that I will get a discount for paying early, these bills go on a separate pile and I mark my accounting calendar to make sure that bill gets paid in time to receive the discount.
2. I review my credit card statement very carefully each month. It doesn’t happen often, but occasionally I will find charges on my bill that don’t look familiar. In this day and age of identity theft, it’s always good to question these charges. Call the provider right away. It’s also always a good idea to have an idea of how much money you owe at any given time, when your payments are due (don’t forget to mark your calendar to avoid late charges and fees), and whether or not there have been any changes to your account. If you have multiple people in your company who carry company credit cards, this auditing process becomes even more important each month.
3. I always pay my bills on time. The idea of paying late fees just drives me crazy. It’s expensive enough running a business without adding lots of late charges on top of everything else we’re responsible for. If you are a procrastinator or are unorganized, and you know this about yourself, set up automatic bill paying with your bank so you’ll never be late again.
4. I record each check I write. At any given time, I know exactly, to the penny, how much money I have in all of my accounts. Overdraft and insufficient funds fees can be real profitability killers for your business and with your personal accounts too. I invested in accounting software for my business as soon as I was able to afford to do so when I was starting out and I can’t image running a business without this automation.
5. I do not max out my credit card limits. Using all of the money available to you in the form of your credit limit could prove to be a problem for you. Sometimes business owners will do this, especially as they are starting up their business. Financial advisors will tell you that creditors like to see people being good stewards of their money by using only 30 percent or less of your credit limit. This limit is usually indicated on your statement.
Maxing out your cards could send a signal to your creditors that you are having financial trouble. What creditors do in situations like this is they classify you as a high risk and that might mean higher rates of interest for you and possibly lower lines of credit.
So if your business needs an infusion of capital, consider other ways of funding this by having a conversation with your banker.
6. I track my spending and know where my money goes. I have a budget that I stick to and I have limits on what I will spend for certain things in my business.
7. I have three to six month’s revenue saved in the event I lose business. Whether you have clients or not, you still need money to operate each month. There are fixed expenses like phone bills, rent, salaries, utilities – that are going to exist whether you have clients or not. You need to make sure that you have a safety net in place so that your business can continue to operate until that lost revenue is replaced.
8. Evaluate your insurance coverage once a year or when you have major changes in your business. Insuring your business is a wise and practical thing to do. You are working hard to build your credibility and your wealth and one event could wipe you out. So, review your policies once each year with your insurance agent. It’s possible to be underinsured, especially if you haven’t looked at your policies in the last few years and your business has changed AND it’s also possible to be over-insured…spending money for coverage that you don’t need in your business.
Now here’s some advice I think is important. The world of insurance can be complicated. Don’t be shy, if you don’t understand something ask your insurance agent to explain.
If you don’t have an insurance agent for your business, start by asking your personal insurance agent if they can recommend someone to you who specializes in business insurance. Maybe they even offer this service. You can also call your local chamber of commerce and ask them to refer two or three agents that you can interview to see which is the right fit for you and your business.
9. I have long term and short term financial goals for my company. Examples of short terms goals might be that you have certain monthly revenue projections for each month and long term goals might be yearly profitability.
So if you want to be able to sleep at night because you know your finances are in order, pay attention to the financial aspects of your business. You’ll sleep better while being unstoppably successful!