Many small business owners fear the money side of their business. This is a result of never really understanding how to keep track of it, and not knowing what the most important metrics are for tracking it. Some don’t want to face the financial truth about their company. “Once-a-year” accountants are not much help, since they speak in a jargon that small business owners do not understand. For their part, small business owners are embarrassed to ask questions for fear of looking stupid. Unfortunately, these actions often mirror what is going on in their personal lives.
Here are seven truths about money that every small business owner must know to be successful.
1. People Spend What They Have
Most businesses will spend all the cash they have available in their bank accounts in an effort to grow their companies. This obviously is not the best way to manage money in any situation. Alternately, money can be wasted if too much of it is freely available without its results being tracked.
Your action: Review your financial statements (i.e. profit and loss, balance sheet and cash flow) every single month. Make sure that you understand what each number means for your business and what actions you need to take as a result. Get help from a trusted advisor. Determine if each expense or investment is critical to the growth of the company and what that expense or investment is expected to return.
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