Managing a business has its fair share of challenges. Nevertheless, I want to ask when was the last time you audited your financial statements? Maybe you’ve felt like it’s not worth the hassle—or maybe you’ve just never thought about it. It’s not something that comes naturally to everyone. However, if you want your business to actually be successful- you need to take control of your finances and make sure they’re in good shape or at least find someone who can.

 A business that doesn’t have accurate financials, is doomed to fail. And we don’t want that to happen. The golden rule in business is to know what your financial situation is. If your books are not accurate, you can’t make good business decisions. You’ll have no idea how much money you’re getting in or how much money you should be making- Your financials are really a mess.

 Society makes the entrepreneurial lifestyle seem glamorous but that’s not always the case. Running a business is a lot of work, and making a business successful is even more work. You have to deal with employees and customers, manage your time, keep track of inventory, and ensure you have enough cash for the business. Then somehow balance all your personal finances.

That is just the day-to-day, how about projections and growth? This can all be very difficult for many business owners to juggle. Let’s take a look at some of the most common reasons why your financials could be a mess and how to resolve them.

1. You don’t know how much money you have coming in and going out. 

You may be wondering why your financials are a mess—and the answer is simple: because you don’t know how much money is coming in and going out of your business.

It’s important for every business owner to understand their revenue. Without this information, it’s impossible to properly budget for expenses and make decisions about how much money should be allocated to each department within the organization.

 The best way to start improving your finances is by creating an accurate record of all incoming and outgoing transactions. This way, it’ll be easier for you to track how much money has been spent on marketing campaigns, education, or office supplies each month.

 COMPASS TIP: We know it can be tough to keep track of all the numbers in your business. That’s why we’ve created a free tool that helps you manage cash flow, expenses, and more. Sign up at https://bit.ly/3Xokd3q and start getting the information you need to make better decisions about your business

2. You use your business account for personal expenses

While this seems obvious, we see business owners do this all the time and it’s a big mistake – even if you’re just starting out. If you don’t separate your business and personal accounts, it’s hard to keep track of your spending habits and budget accordingly. This can lead to huge problems down the road. Your business continues to grow and expand which is ultimately the goal!

 To avoid this problem, open a separate bank account for your business and only use that to pay for business expenses. Never use it for personal purchases or expenses. Setting up a bank account is super simple these days, just go online.

COMPASS TIP: Consultations are always free. Book a call with us and let us help you navigate your business. https://compassconsultingfirm.com/contact-me/

 3. You’re not saving for taxes

If you’re not saving for your taxes, whether it’s payroll, sales, or estimated tax payments, then you’re in trouble. It’s critical to know how much money you’ll owe in taxes. What you can do is save an amount away so it doesn’t get caught up in your spending. 

 Keep in mind that if you don’t save enough money for taxes and end up owing more than expected, means less money for everything else! This also means that any future plans might not go as smoothly as originally planned. 

 COMPASS TIP: We highly recommend setting up an operating account as well as a payroll account to help ensure the funds are available.

4. Lack of financial knowledge 

Hey! You don’t have to do it all and certainly don’t have to know it all. If your finances are a mess, it’s probably because you don’t have a good understanding of how they work. If you’re not sure how to make sense of the numbers and how they relate to each other, then it’s going to be hard for you to understand what’s going on with your finances

 If this is the case, it’s important that you take some time to educate yourself. Learn the basics so that you can understand what they mean and how to push your business forward. 

 You’ll also need to learn about common financial terms. This will help you converse with others who have a more advanced understanding than you.

 COMPASS TIP: Head on over to https://cpeonline.cpaacademy.org/ for FREE training.

5. Your bookkeeper does not understand cash vs accrual

An easy mistake to make—it seems like a small thing, but it can have big consequences for the business. Why is this a problem? Some bookkeeper doesn’t understand how to account for revenue and expenses in the correct manner. When this happens, the numbers you see on the reports will be misleading. Not only for day-to-day projections but for tax reporting as well. Yikes!

 COMPASS TIP: If you want to keep your financials from being a mess, make sure you hire someone who has experience with cash vs. accrual accounting.

Whether you’re just starting a business or you’ve been in the game for a while, your finances are likely something you’ve been meaning to get around to. Having your finances under control is one of the most important things a business owner can do. It will help you make smart decisions, avoid costly mistakes, and keep your mind at ease when it comes to money matters. it’s not as simple as just making an appointment with an accountant- then sitting back and waiting for the bills to stop coming in. In order to truly get your finances under control, you need to make sure that every aspect of your business is running smoothly.

Need some more help? Drop a question/comment, Compass Consulting Firm specializes in assisting small to medium-sized businesses to build solid foundations that become critical for stable growth.