Do You Really Know Where Your Business Stands Right Now?

Most of us started our businesses because we wanted them to take us somewhere.

Maybe you wanted more freedom. More money. More time with your family. The ability to travel or live abroad. Maybe it's the million-pound house in the country, providing private schooling for your children or building enough financial security that money no longer feels like a constant worry.

Maybe your ambition is to build a multi-million-pound business with a team around you. Or perhaps your version of success is a smaller, highly profitable business that allows you to work three days a week, travel more and actually enjoy the life you've built outside of it.

Maybe it's a mixture of all of those things.

Whatever your version looks like, there is usually something you're working towards - something you want your business to make possible.

So, what does that look like for you?

What do you actually want your business to give you? What kind of life are you trying to create? Where do you want to be financially? What does success actually look like?

These aren't just nice things to think about. They give us something to work towards.

Because once we understand where we're trying to go, we can start working out what the business needs to do financially and operationally to help us get there.

Your business holds the key to making that destination possible.

But knowing where you want to go is only one part of the picture.

We also need to know where we're starting from.

You can't plan a route without knowing your starting point

Think about the last time you used Google Maps or put a destination into your sat nav.

You can tell it exactly where you want to go, but before it can work out how to get you there, it needs one other very important piece of information:

Where are you starting from?

Your business is exactly the same.

You might know that you want to build a £100,000 business or take £5,000 a month from your business. You might want to employ your first member of staff, or reduce your working week to four days.

You might want to buy a house, build investments, travel more, take three months off each year or simply stop worrying about whether there's enough money to pay yourself.

Those are destinations. But before we can work out how you're going to get there, we need to know:

Where is your business right now?

Not where you hope it is, where you think it should be by now.

Not where it looks like it is because there happens to be money sitting in the bank today.

Where is it actually?

Your business today is your starting point

I believe a business should financially and operationally support the life its owner is trying to build.

That means your business and your life aren't two completely separate things. If you want a particular lifestyle, your business needs to be capable of supporting it.

If you want more time, we need to understand whether the way the business currently operates can give you that time.

If you want more personal income, we need to understand what the business needs to generate in order to provide it.

If you want to employ someone, invest, expand, reduce your hours or change the way you work, we need to understand whether the business can financially and operationally support that decision.

And the information we need to begin answering those questions is already sitting inside your business.

Your business today holds many of the clues to the future you're trying to create. Your numbers can help us understand what's working, what's making money, what's costing money, what's growing, what's declining, what you can afford and what needs your attention.

Ultimately, they can help us understand what might need to change if you're going to get from where you are now to where you want to be.

But first, you have to be willing to look

And this is often the difficult bit.

Sometimes we don't want to know.

That can come from fear. It can come from overwhelm. And sometimes it simply comes from familiarity - we've been running the business in the same way for so long that we've stopped questioning what's actually happening underneath it.

Maybe your bookkeeping is behind and you know you need to sort it out.

Maybe you've got accounting software but you don't really understand what any of the reports mean. You haven't looked at your numbers properly for months - or perhaps you've never really looked at them at all.

Maybe there's money in the bank, so you've assumed everything must be okay.

Maybe you already have that uncomfortable feeling that something isn't quite right, and you're worried about what you'll find if you start digging.

Or maybe you think you're already looking at your numbers because you're doing the bookkeeping.

You've entered the invoices. You've recorded the expenses. You've matched a few transactions. The bookkeeping is completed for the week or month.

Job done.

Until next week. Or next month.

But completing the bookkeeping and understanding what is actually going on inside your business are two very different things.

The bookkeeping gives us the information. We still have to stop, look at it and understand what it's telling us.

And when you haven't looked at your numbers for a long time - or you've never really looked beyond completing the bookkeeping - you first need to understand what you're actually looking for.

Otherwise, you can have perfectly organised records and still have very little idea of how your business is really performing.

Being busy doesn't necessarily mean you're going in the right direction

You can be incredibly busy and still not be building a profitable business.

You can have a full client list while spending so much time servicing those clients that the work isn't particularly profitable.

You can have sales coming in every week while costs are increasing just as quickly.

You can have more turnover than last year while actually keeping less of it.

You can have money sitting in your bank account while owing VAT, tax, suppliers and other liabilities.

You can even have bookkeeping that looks "done" while the numbers underneath it aren't actually accurate.

The problem is that not looking doesn't change what's happening.

It just means you're trying to navigate and make plans without really knowing where you are.

And if you don't know where you're starting from, it's very difficult to work out whether the route you're currently taking is actually going to get you where you want to go.

That's why simply asking:

"Am I busy?"

or

"Is there money in the bank?"

doesn't tell us enough.

We need to understand the business underneath.

So, do you actually know where your business stands?

If I sat down with you today and started asking questions about your business, how many could you confidently answer?

·       Do you know how much you've turned over so far this year?

·       Do you know whether the business is actually profitable?

·       Do you know how much cash the business really has available?

·       Do you know how much your customers owe you - and what your business owes elsewhere?

·       Do you know what it actually costs to run and deliver your business each month?

·       Do you know whether you're financially on track for the goals you've set?

And perhaps most importantly:

Do you know whether the business you're running today is actually taking you towards the life you're trying to create?

You might know the answers to all of those questions.

You might know some.

Or you might be reading this thinking:

I genuinely don't know.

And that's a perfectly valid starting point.

Because the purpose of looking at your numbers isn't to judge what you've done.

It's to give yourself information.

Your numbers are information

Your numbers aren't there to tell you whether you've been a "good" or "bad" business owner.

They're information.

And information gives us something concrete to work with.

·       If profit is lower than expected, we can ask why.

·       If costs have increased, we can investigate what's changed.

·       If cash is tight despite making a profit, we can look at where that cash has gone.

·       If customers owe you thousands of pounds, we can look at your credit control and how quickly you're getting paid.

·       If a service takes far more time to deliver than you realised, we can look at the price, the process or whether that service is actually worth continuing.

·       If you're not currently generating enough profit to fund the life you want, we now know there is a gap between where you are and where you want to be.

None of that information automatically means something has gone terribly wrong.

It gives us something much more useful:

A place to start.

Because once we can see what's happening, we can ask better questions. We can investigate. We can make changes. We can decide what needs our attention now and what can wait.

We can stop guessing.

That's control.

Financial control isn't knowing exactly what's going to happen next.

Financial control is understanding where you are well enough to make better decisions about where you go next.

This is your starting point - not your final destination

Discovering you're not where you wanted to be doesn't mean the plan has failed.

It means you have new information.

·       Maybe your target needs changing.

·       Maybe your prices need reviewing.

·       Maybe your costs need attention.

·       Maybe you need more clients - or perhaps fewer clients at better prices.

·       Maybe the way you're delivering your services needs to change.

·       Maybe you need to get your bookkeeping under control before you can confidently make any of those decisions.

The point isn't to look at the numbers, find something you don't like and panic.

The point is to understand what they're telling you and decide what you're going to do with that information.

Because now we have something to work with.

We know where we are.

We have our starting point.

And once we know our starting point, we can start mapping the route between the business we have today and the business - and life - we're trying to build.

So how do you actually find out where your business stands?

That's the question we're going to answer next.

Because telling you to "know your numbers" isn't particularly useful if nobody tells you which numbers you're supposed to know, where to find them or what they actually mean.

In the next article, I'm going to break down the information I'd look at to understand where a business stands.

We'll look at turnover, profit, cash, what customers owe you, what you owe, costs and liabilities. We'll also look at where you can actually find this information and some of the reports that can help.

And importantly, we'll talk about what those numbers are actually telling you - because simply running a report isn't the same as understanding it.

Once we know what we should be looking at, there is another important question we need to answer:

Can you trust the numbers you're looking at?

Because understanding your numbers is only useful if the information underneath them is accurate.

Ready to find your starting point?

Throughout October, we're going to work through this journey as part of our Get Back in Control series.

We'll look at where your business stands, what you should be looking at, whether your numbers are accurate and how you can start using that information to make better business decisions.

Because before we can plan the route to where you want to go, we need to know exactly where we're starting from.

Not sure where your business stands?

If you've read this and realised you're not quite sure what's happening behind the numbers in your business, you don't have to figure it all out on your own.

Book a call with Serenity Accounting Services. We can talk through where you are now, what you're trying to achieve and where you might need some support to get your finances back under control.

Sometimes the first step is simply understanding where you're starting from.