Financial Certainty: What? Why? How?

I have been in the accounting game for a long time.  To put this in perspective, when I started I had hair!!  I was single, and I had only just met my wife to be.  Now my first born is off to Uni.

Why is this relevant?  Well, it means that over time I have advised a lot of different businesses and seen the various types of situations that put a business into distress.  In fact, it is unlikely that if a client presents that I would not have seen the same issue, if not very similar.

What causes the majority of businesses to go into distress? In my opinion, in 80 -90 % of cases it is a lack of financial certainty. 

What does lack of financial certainty mean? 

To me, this is a client who does not know where their business is at any one point in time. Or a client who is judging the performance of their business on the wrong information.  For example, a client that looks only at the bank balance without taking into account other factors, such as the creditor balance and aging and the cash flow implications of future commitments, like tax or BAS.

So how do you achieve financial certainty? It comes down to one thing – know your numbers.

The unfortunate reality is that most small business owners are so bogged down in the running of their business they don’t have the time (and often the expertise) to keep on top of the numbers.  Most realise they need a finance department but can’t afford to employ a full-time CFO. 

But did you know, this is one area where you can leverage an accountant?  Accountants can provide regular and detailed reporting on the performance of your business.  You get the benefit of an internal finance department without the cost (and hassle) of having to hire someone.  

Regular financial reporting alone will not guarantee that your business will be profitable. It may even open up areas of opportunity by allowing your accountant to identify ways to improve your business.  It will, however, give you certainty of when, where and how much money will come and go, and ultimately, how much you can take home.