The Knowledge Gap
If you attended my 2021 Masterclass- the 3 things every business owner should know- you would have heard me talk about the Knowledge gap. The reality is that my whole vision for Accelerate and how we can help our clients is based around this concept.
I truly believe that for a business to be successful and have sustainable profits, the business owner needs to take control of certain activities that generally fall into this knowledge gap. So, what is it?
Expectations versus reality
A lot of business owners starting out will engage the services of an accountant. Hopefully sooner rather than later! They may also have a bookkeeper or they might be looking after this side of things themselves. However, what services and support the business owner receives from these partners is usually very different to what they expected.
On one hand, the bookkeeper will typically track and categorise the day to day accounting transactions, such as income and expenses. They might also run payroll and some other tasks, but generally their role is transactional only.
On the other hand, the accountant will likely look after all end of year accounts and tax filings, keeping the business up to date and compliant with those things that are necessary if you have a business.
But there’s that bit in the middle;
Budgeting
Performance analysis
Cash Flow management
Who looks after these activities? For larger businesses, normally there is an in-house accountant that does this type of thing. However, for smaller businesses, these activities are still just as necessary but they are often overlooked.
Why do you need these things?
The way I see it, your budget is your roadmap for the year. No, you won’t always be in line with it and of course things can go off track. But that’s the point! To know in a measurable way that you are moving away from your original goal is a powerful thing and allows you to make corrective action.
As a business owner you should know how profitable (or not) your business is at all times. You should never have to wait until the end of a financial year to see how things are going. And more importantly, you should never rely on someone else to tell you how your business is doing without a full understanding of what they mean and why.
Cash management is an activity that should be the first thing you master in your business. It is the lifeblood of what is happening in your business and no business can survive without it. Do you have a plan for the cash coming into your business each month? Are you comfortable that you can pay your taxes as they fall due or that you can cover expenses even in quieter months? Mapping this out and having a system in place for it will ease the stress that normally comes with owning a business.
How to manage this?
As a business owner you could ask your end of year accountant to help with these tasks. They will likely support you but the fees are not going to be cheap. You could also engage a monthly CFO services for a set number of hours a month, but are you ready to make a monthly commitment to that?
My advice? Fill this void yourself. As the business owner, you should always be comfortable talking about your business finances, you should always have a roadmap for the year ahead planned out and you should always know where your business stands in terms of performance and cash flow. Why not take the time to upskill in this area of your business so you know it inside out before handing it over to someone else?
Taking ownership of this side of your business is essential if you want to create a sustainable and profitable business. Even more so if you want to grow and scale! Even if your business grows to hire a monthly virtual CFO or an in-house accountant, you still need to understand all areas of your business finances so you can ask the right questions and have frank conversations when needed.
Having a deep understanding around this will give you clarity and confidence when discussing your business. It will enable you to be more determined in your decision making and make action taking easier if you are basing things on fact and not feelings. How good would it feel to be in that position rather than stressing and worrying about what might be going on in your business rather than just knowing!
If you follow me on social media you know that I love to share information about this side of running a business. I really believe that the more knowledge that a business owner has, the better placed they are to become successful and create impact in their field. And that’s better all round, for the business owner, their family, their staff and their community!
That’s why I created my new offer. After spending the last two years really getting to know what struggles business owners are having, I could see the need for sharing this information in an approachable and accessible way. No jargon, no complicated explanations, just practical information that you can use in your business and see results quickly.
A lot of people are intimidated by this side of their business, they shy away from asking questions because they think they should know this stuff. But how?! When you decide to start a business, you’re not handed a manual on how to do things, you have to learn as you go. That’s exciting and terrifying all at the same time! Why not get more support?
If you feel that this is an area of your business that you want to get under control in 2022, check out the link below for more information on my course.
We start at the end of January and it is going to set you up for an amazing 2022 in business!