Small Business Financial Planning, Small Business Bookkeeping, Financial Management & More

Small business financial planning—along with small business bookkeeping and overall financial management—are all essential skills you will need for small business success.

Finding start-up money is difficult. Using it profitably, both short- and long-term, can be daunting! And the only person responsible for making financial business decisions is the owner.

Yet for some reason, most people shy away from the numbers side of their business. They fall in love with their product or service idea and focus on operations, hoping and believing that someone else is minding the financial side of things. Believe me... I know!

Yes, finding the right financial people is an important step towards effective financial management. But don't fool yourself. Even with the best advisors, there's still no guarantee of business success.

The most proficient bookkeeper, the most sophisticated accountant, the savviest investor cannot compensate for bad financial decisions. Your advisors will help you gather the information you need, but in the end, the responsibility for small business financial planning and making the right financial decisions for your business rests solely with you.

Understanding financial statements is not all that complicated. And as long as you're at the helm of your big financial ship, having your navigator's license seems like an important requirement, don't you think?

After all, if you can't monitor the numbers, how else can you tell whether your discount is generating more bottom line dollars due to volume? Or whether that inventory budget will be enough for this upcoming project?

Understanding Everyone's Roles

Your bookkeeper's job is to take all those little pieces of paper and create a sense of order, allocating the right receipts to the right category. Your bookkeeper is not a custodian or advisor.

As you go about your business, you are spending and taking in money in various forms. Cash purchases are obvious. Less obvious are quarterly insurance payments, credit card payments… you get the idea. In other words, small business bookkeeping is the recording of your activities. Once that's done, you're ready for the next advisor, your accountant.

Accountants review the bookkeeper's documents and reorganize your information into summaries called Financial Statements. These statements determine your profit or loss for the period and summarize the results of the financial management decisions that got you there.

Financial Statements provide the data you can use to gauge how you're really doing and to complete small business financial planning.

If you can't compare this year with last, your business with others in the industry, next season's pricing with last year's, or connect compensation to profitability, how can you make decisions with the bottom line in mind? Without a scientific and realistic basis for making decisions that involve money (all decisions), you're basically flying blind.

But the bottom line is that you are in charge, when it comes to financial management, just as you are with the other aspects of your business. Remember, it's YOU who have to gauge what is going on financially. Your bookkeeper documents, your accountant prepares. You make the decisions. So regardless of who's around you, you're holding the bag.

Make Sure You Master Small Business Financial Planning

We read about it all the time. An active business that appears healthy - great reputation, active sales - and then Poof! Out of business.

How can this happen?

Poor cash management? Money tied up so bills unpaid? Are profit margins too low? Maybe unproductive assets are draining profits.

Your job is to monitor, measure, invest, borrow and collect enough money so you business continues to operate on track.

"Enough" means the right amount at the right time - enough on hand to cover expenses, enough lined up so you can acquire assets, and enough invested so you get the best return.

Contrary to popular belief, the key to financial management is not "simply" making more and more money. Regardless of how much money you have, managing it is critical, to minimize loss and maximize return.

Financial Management is about sources and uses of funds - planning where your money is coming from, where it's going, and how to make sure the return on capital exceeds the cost. That's the very essence of successful small business financial planning.

Cash flow forecasting is another financial management skill you'll need to master.

Small business financial planning and financial management are a dose of reality. With the proper guidance, tools and a positive attitude, you can actually learn to unlock the mysteries of financial analysis. The process may sound dry, but if all you're doing is bookkeeping and paying taxes, you're flying blind. I know, because I did.

Financial management is not about filing receipts, doing bookkeeping entries or hiring them out. It's not about preparing taxes either. It's much bigger than small business bookkeeping, or even small business financial planning, although they're all related.

Small business financial planning is just like personal financial planning. In both, it's a matter of spending less than you're taking in, and making conscious decisions about what moneys are allocated where.

Like it or not, you need to master these small business skills if you are to ultimately succeed:

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