Congratulations! You recently launched your business. You have sales. You have employee(s). You love your logo. And customer feedback is fantastic!
At the risk of raining on your parade, how are you
performing financially? Of course a new
business can’t be expected to thrive immediately. Nobody expects profits in the first year
right?! For most startups it can takes
2-3 years, doesn’t it? Although often
true, don’t let statistics impede your drive to reach greater financial results
sooner.
Let’s face it, as a passionate entrepreneur; you likely did
not start your business with a CFO as your corporate wingman. After all, an anal accountant might rain on your
parade, kill momentum, and frankly cost the business cash that could otherwise
be going to ‘more important things’. I
get it. But if you don’t have financial
guidance, you might as well be flying a plane without instruments and yet
expecting to safely land at your destination.
So – until you can afford to hire a fulltime (or even part-time)
CFO, let me give you 5 financial tips as your ‘casual CFO’ that should help
keep things on track (at least until I release my next 5 tips).
1.
Separate
business money from personal money.
Use separate credit cards to make purchases, and when you have to
contribute cash into the business – do so in lump sums into the corporate bank account
rather than paying directly from your personal debit/credit cards for
individual transactions. It might not
seem important at the checkout, but it will save a lot of admin pain in the
future when you are truly trying to get a handle on profitability, cash flow
and you need to provide support to CRA when filing corporate income taxes.
2.
Take out
a bank loan right away, and make
sure it is double what you think you
will need. Entrepreneurs underestimate cash flow
requirements as frequently as home owners underestimate the costs of kitchen
renovations. The reality is it is far
easier to get a loan when you don’t actually need one. By the time you do, you have an uphill battle
explaining why you have missed targets and convincing a credit analyst why your
current forecasts are now more credible than your original plan. I have never heard of a business failing
because they had a surplus of cash.
Plus the steps required to secure a loan will help you refine your
business strategy – just try it and see.
3.
Review
your financials at least quarterly.
Standard financial reporting is like navigating through traffic by
watching your rear view mirror. It
tells you where you have been and what you have done – in the past tense. But until
you have a financial advisor by your side, reviewing your financial statements
is still likely your biggest predictor of future performance. At a minimum, comparing sales and expense
trends over time can help you at least understand if you are heading in the
right direction. And to do this
comparison, you must ensure someone is entering all transactions into your
accounting software in a timely fashion.
4.
Focus! Decide how you will compete in the market by
choosing only one of the 3 following options:
a.
Product Leadership (best in class, R&D
focus)
b.
Operational Efficiency (lowest cost provider,
best value for money)
c.
Customer intimacy (relationship focus, trust,
loyalty).
Again, you can only pick
one. So think hard and commit to
it. You must still perform well in the
other two to be successful, but you must commit to lead with only one or you
will waste resources and undermine your financial potential. Once you have made your choice – write it
down and talk about it endlessly to make sure it sticks hard to everyone who
can influence your business.
5.
Be
obsessed about aligning your image to your chosen focus. Entrepreneurs often complain to their
CFOs/controllers/bookkeepers about the money “wasted” on things like interest
rates, service fees, exchange rates, accounting and legal service rates – all
the while spending much larger amounts of money every day on building an image that
is not consistent with the one chosen focus. Ego can be the biggest influencer. Think about “needs” versus “wants” for
your organization. Do you need a fancy office or big signage or do
you want these things because they
represent success in our society or from your business history. To help – ask yourself ‘Does this spend align
to …’ and complete with your chosen focus.
If you and 1-2 peers can’t agree it’s a ‘yes’, then it likely isn’t.
Susan Richards, FCMA has over 15 years
experience helping Entrepreneurs with Financial Analysis, Business Planning,
Business Strategy, and Financial Reporting.
In 2009, Susan received a CMA Creative Leadership award for ‘Intuition’
and in 2010 awarded the distinguished title of ‘Fellow’ from the Society of
Management Accountants of Ontario.
Susan Richards has recently launched
Givopoly, Ottawa’s exclusive gift concierge service, with business partner
Craig Hung. Givopoly aims to satisfy
thoughtful but busy professionals by bringing great products and services from
locally owned businesses to your fingertips with fast and friendly service.
If you are an entrepreneur who would like to engage
‘casual CFO’ services please email Susan Richards at Susan@casualCFO.com
