The Ten Priorities; Priority #7: Managing your Finances

Ten Priorities in business, financial management

Ten Priorities in business, financial management

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This is the seventh post in the series of The Ten Priorities: Laying the Foundations for a Great Business and Life. The seventh Priority is about Managing the Money. The introduction to this series on The Ten Priorities is here.

I’ve said before (in priority #3), that a business must make profit, or it’s a hobby.

But in Priority #7 we’re not talking about profit, we’re talking about financial management.

Most business owners outsource the bookkeeping and accounting functions of their business. That’s great, but there are two problems with that:

  • Business owners often misunderstand what accounting is.
  • Reporting arrangements are often inadequate

The misunderstanding is that business owners generally don’t appreciate that there are two different types of accounting:

  • Compliance accounting
  • Financial management accounting

Compliance accounting is simply about how much tax the business must pay. What matters about that, is that it is done properly and timely. But compliance accounting is only the tip of the iceberg.

The most interesting part of the iceberg

The rest of the iceberg, the most interesting part of the iceberg is Financial Management accounting. Accounting that answers questions such as: “Last month, what percentage of our income went to wages?” Or, “In the last six months, which have been our 10 most profitable products?”

And that leads to the second of the problems I mentioned before:

You must get regular reports that give you the answers to the financial management questions that matter to you. And those reports must arrive promptly. I tell my clients to insist that the financial management reports about last month arrive on their desk no later than the fifth day of the new month.

When you sit down with your accountant and bookkeeper and explore with them the financial management questions you need answers to, to build a great business, and insist they give you those answers, every month, your business and your life will never be the same again… I promise you

Next week, Priority #8: Managing your People

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