Question: Can beans be turned into a complete meal?

Written by Martin Catling
Tuesday, 27 October 2009
The foundations of any business are its finances and controls (bean counting). Even if you have employed the best bean counter in Essex, what are they serving up every month? Whatever your business, you must have accurate financial information to steer your company forward. There's no point waiting for your accountant to produce your accounts months after your financial year-end - it could all be too late by then. The current environment is tough and if you are making losses, you need to know NOW in order to identify the problems and set about fixing them. So turn to your bean counter (you may need to look in a mirror) and ask the following questions: Was my business profitable last month? What is the current break-even point of the business? Do my cash-flow forecasts (both short term and long term) allow the business to operate within it's current funding headroom and is it being actively controlled and managed? If your bean counter looks back blankly at you, then guess what? There's no meal on the table and you will have to continue to operate in the financial wilderness, not really knowing whether you’re winning or losing. To be frank, this is why so many small businesses fail. Often there is no bean counter, or the business owner lacks skills in the financial arena. So rather then face the reality of the numbers, they often continue to fund (more often than not personally) the losses, only to find further down the road that for some reason or other, the situation has not improved. However, with a little guidance, modest investment and training, you really can turn your beans into a banquet. As previously stated, if a business is to succeed and flourish, you must first ensure you have solid financial controls. Once you have management accounts (and you are competent in analysing and interpreting your profit and loss statement) and cash-flow forecasts, your armoury of key business skills will have widened considerably. In the meantime, here's a bit of a steer: Turnover (Sales) may look fantastic, but what margin did they generate? Sales without a profit margin are a recipe for disaster. If we know our average profit margins, what sales do we need to generate each month to cover all of the business overheads? How long is it taking you to turn your sales into cash? Remember, without any cash your business will starve. Don't wait for a 'phone call from your bank manager to tell you that your business has run out of financial headroom. You should know what your bank balance will be next week, next month and next year, simply by working to your budgets. Answer: Yes. Those beans are really a very important business ingredient. Once you are managing your beans properly, they will multiply, convert into cash, pay your wages and allow you to buy a bloody good meal of your choice! Martin Catling Partner Pro-actions LLP Pro-actions is a specialist business improvement company located in Chelmsford. We currently work with local companies of varying sizes and from a wide range of industries providing forward focussed bookkeeping, business mentoring and bespoke marketing support. If you want to learn more, please do not hesitate to call 01245 344263 and speak to one of our team.