4 Reasons Why You Shouldn't Delegate Your Company's Finances
Don't forget about the numbers while your busy leading sales and marketing efforts.
By Melissa Houston •
Opinions expressed by Entrepreneur contributors are their own.
As an entrepreneur, you start your new business with hopes and dreams. You nurture your business, you want it to be successful, you have lofty goals and you do everything you can to achieve them. You swear you'll be the best.
But do you know your business numbers? Because business is all about numbers. More to the point, have you considered what happens when you make business decisions without knowing how it will impact your bottom line?
Do not go into business blindly. You need to understand how your decisions affect the profitability of your business. The reason entrepreneurs go into business is to make money, so if you are not tracking the money you are making, or even know whether your business is generating a profit, it defeats the purpose of being in business. Here are four reasons why you need to familiarize yourself with your company's finances.
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1. You can create a financial plan
Having a financial plan is important because it gives your business direction. You can set goals such as revenue targets and monitor your progress against these goals throughout the year. You can also set profit margin goals to ensure the profitability of your business. You'll want to do this to ensure the expenses in your business aren't so inflated that you aren't making any profit.
2. You can identify issues before they become bigger problems
When you monitor your business throughout the year you can see issues forming that can potentially become bigger problems and cost you a lot of money. But, because you are monitoring your numbers, and you know your numbers, you will see this issue before it becomes a huge money suck and make adjustments to course correct. This actually ends up saving you a lot of money as you prevented a financial loss from occurring.
The U.S. Small Business Administration states, "Looking closely at money-in and money-out helps maintain a sustainable balance between profit and loss."
3. You can understand how each decision you make as a business owner affects your bottom line
Because you understand your business numbers, you will have a solid understanding of how your business decisions will affect the profitability of your business. You can make confident business decisions knowing that these decisions will increase the profit line in your business.
Related: 3 Reasons Why You Should Always Know the Financial Health of Your Business
4. You can stay in business for the long term
One of the main reasons businesses close their doors is due to a lack of profitability. Don't let that be your business.
When you are the CEO of your business, you are likely taking on the roles of many because you can't afford to hire all the professionals. You're likely the sales manager, marketer, operations manager, customer relations . but don't forget to include the finance manager in those roles. Investing in this skill now will not only pay off now but will carry your business into the growth stage, and when you can afford to hire financial help, you will always need to be involved in the numbers and decision making.
