Is Your Business Suffering From Financial Neglect?

Posted on February 16, 2011

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As the CEO of a small business, one of the most valuable uses of your time is managing the financial health of your business.

Monitoring and managing your business’s financial health involves more than simply maintaining a cushion in your bank account or having a bookkeeping or record keeping system in place. 

All of these activities are important.  But managing your business for financial health is about implementing a system that provides an accurate financial picture of your business and how it is performing.

What is Financial Neglect?

There are two main types of financial neglect:

  • Fully neglecting to track income and expenses by letting receipts pile up (or get lost) and failing to enter data into a bookkeeping system.
  • Doing a decent job of keeping income and expense records up to date, but failing to use the numbers to answer questions about the financial performance of your business.

According to Entrepreneur Magazine, the second type of financial neglect is practically an epidemic among owners of small to medium-sized businesses.  Ton and tons of successful business owner loathe dealing with numbers.  Typically, they say they are simply too busy running the business to deal with tracking income and expenses or analyzing the numbers.

Your numbers answer key questions about how your business is performing. 

  • How efficient are you at generating sales while containing costs? 
  • Are you able to pay your vendors? 
  • How efficiently are you using your business assets to generate profits? 

When you evaluate and analyze the numbers, you will answer these key questions that all business owners should know.  Savvy business owners know that managing their business’s financial health is vital to the long-term sustainability of their business.

In our next post, we will discuss the tools you need to manage and monitor the financial health of your business.

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