3 Reasons Why You Should Always Know the Financial Health of Your Business
Here's why you shouldn't blindly outsource the financial responsibility of your company.
Entrepreneurs are busy people, and for efficiency’s sake, you need to delegate many tasks that others can do just as well as you can. Outsourcing is cost-efficient, as long as it makes sense — particularly for administrative tasks such as creating graphics, social media posting and other tasks that can be performed just as well by someone else at a lower rate so you can focus more on what makes you money.
But consider this, have you outsourced the financial responsibility of your company?
If you said yes to this question, you may want to revisit that decision.
It makes sense to outsource your bookkeeping, as long as you are keeping controls in place to ensure the data is not tampered with. It makes sense to have an accountant to offer you advice and complete your annual corporate tax return. But if you are relying on others to tell you the financial position of your business, you are making a mistake.
Why? Because nobody will ever care about your business as much as you do. And as a business owner, you need to know your numbers to ensure you make the best decisions for your business.
As a business owner, you need to know your numbers.
1. Nobody knows your business as well as you do.
You can’t leave the important financial decisions to someone else when you are the one who knows your business the best. It’s great to get advice or second opinions, but ultimately you are the decision-maker and you need to be responsible for those decisions and understand the decisions you are making very well.
Having a complete understanding of the numbers that drive your business will put you ahead of the competition.
2. You make informed business decisions.
You make smarter decisions when you know how your decisions are affecting your bottom line. All the decisions you are making for your business affect your bottom line, either directly or indirectly. When you understand your business numbers, you will get a clearer picture of how a decision that you are making will affect your bottom line, which is your profit.
Some business owners like to brag about their high revenue figures, but those numbers are meaningless if there is no profit attached to them.
3. You have more control.
You need to be on top of your numbers to ensure that your bank accounts balance to your books every month, ensuring there is no missing information or money. Outsourcing is always a good idea, but make sure there are controls in place to protect your bank account and your assets.
Every small business needs internal financial controls to help ensure its money is properly managed. Your business could be at risk for employee fraud, cash flow shortages or even bankruptcy if you are not aware.
According to a Hiscox study, U.S. businesses affected by employee theft lost an average of $1.13 million in 2016. Small and midsize businesses accounted for 68 percent of cases, and their median losses amounted to $289,864.
The bottom line is that in order to be the best possible business owner, you need to know your numbers. It is your responsibility as a business owner to ensure you are equipped with the skillset and knowledge to understand the financial impact of your business decisions.
When you know your numbers, you know your business, and you position your business for success.
Entrepreneur Leadership Network Contributor