How many small businesses prepare financial statements on a monthly basis? The argument is often that as long as there is money in the bank, the business is profitable; or the accountant only does the “figures” for tax purposes once a year. It seems that the value of financial information is not appreciated by all.
This is not a South African phenomenon, but a worldwide concern. Most entrepreneurs at least have one figure on their fingertips – sales. While this is a good starting point, a great deal more is needed.
Many entrepreneurs have a good “feel” for the figures – what their margins are, the business expenses and monthly obligations – this is frankly not good enough. You must know what is exactly happening in your business.
If you do the financials once a year, often a few months after year-end, it’s too late. If you are in trouble, then you were probably in trouble long before that. To make a financial decision you need financial information.
If you do not have the knowledge to manage this process, buy it in. There are many easy-to-use software programs available and designed for smaller businesses, which you can consider. Maybe you could call in an accountant to get the process going and plan who will be responsible for what.
Financial statements are not solely for the purpose of applying for funding or tax submission. Their main use is for you as the business owner to know what is cooking in your business – it’s all about control.
Not only do you need the finance information at your fingertips, you also need to interpret this information. If financial statements are Greek to you, you need support, or even better, go on a course. There are many of these “Financials for dummies” or “finance for non-financial managers” courses available. It can only help business.