The wealth of your business does depend on you keeping on top of your paperwork and administration, as well as controlling your cash flow. You also need to make sure that you are focused on your yield or net profit, taking into consideration all revenue and expenses.
There’s no point being in business and putting in all the time and effort if you are losing money or going backwards. Owning a business can mean long hours, huge effort, and a lot of hard work, so you do want to make sure it is worth it. Most people own or purchase a small business to give them flexibility and the opportunity to enjoy the fruits of their labour, so you do need to be making a healthy profit to make sure you can enjoy your flexibility and reap the rewards for all the effort you are putting in.
It is fine to use an accountant or employ a financial controller/manager to keep a watchful eye over your finances, and many do, as figures are definitely not everyone’s specialty, that’s for sure. It is, however, vital that you understand balance sheets, profit and loss reports, and also have a clear understanding of your income and expenses and how things are flowing. It’s also imperative to understand your yield, your sales figures, and targets/incentive programs
that you put in place to make sure they are a ‘win-win’ for all parties concerned.
Cash flow is really important to the health and wealth of any business. Don’t take on debtors or give credit unless you really have to. Many businesses no longer offer terms of credit these days as the risk is often too high. And make sure that you do not spend what you do not have in the day to day running of your business or ring up unnecessary debts. It’s important to be able to sleep at night, and if you are living in fear that people will come knocking on your door to
collect money or you feel that you are in way too deep, it’s really not worth the worry and the stress. Keep a tight rein over your finances and ensure you keep yourself updated regularly on your financial affairs. Do rely on advice from your advisors but make sure that you are fully across your financial position at all times. Also make sure you keep on top of your obligations to employees (wages, superannuation payments, etc.) and across your ATO requirements
(BAS statements and tax requirements). Don’t get yourself into financial strife due to lack of awareness of your exact financial position at all times.