🍦 Financial Habits You Should Build For Your Business

Hey friend —

I'm not a habit-building expert. I've tried many of the apps, and my lack of focus and commitment to any of them resulted in the habit not sticking.

It's only when something becomes really important that I start to put the foundations in place to support myself to turn up to that habit. That begins to create a routine, and I can then be focused on it.

This is even harder daily or throughout the week - but today, I want to share some financial habits around your business that can usually be done monthly. It could be a 30-minute catch-up with yourself, your business partner, or your team at the end of the month.

We're going to start with your bookkeeping. Because if the data isn't there in your Xero or Quickbooks or whatever you use, how will you be able to get to your destination when your map is blank?

Xero, for example, is your map. The more complete your bookkeeping is, the more points of interest and road names and towns are on that map, and then you can navigate easier to your destination - your goal.

Painful map analogies aside, you hopefully get what I'm saying here - spending some time each month completing your bookkeeping, whether that's a weekly habit, a monthly one, or investing in an accountant or bookkeeper to take care of it for you. As long as someone is doing it, you have reliable data to see how you are doing month on month, spot trends, overspending, and income streams that are or aren't doing so well. People view bookkeeping as 'just' bookkeeping, but it's far more valuable than a set of accounts.

Accounts are for HMRC and Companies House.

You do them because you have to, and they are completed annually, so they are already out of date by the time you get them. Bookkeeping is for you, the business owner, to have your finger on the pulse of the business.

Once your bookkeeping is done, have a month-end meeting with yourself, your partner, your team if you like or even your accountant. Check your profit & loss; how does your balance sheet look? What does your cash flow situation look like?

Xero and Quickbooks both have reports on hand at the click of a button for a quick solution, and you can even get management reports prepared, probably by your accountant, so that you can delve even deeper into the analysis of all of this. It's vital that you READ your map now that you have it - yes, sorry, we're sticking with the map analogy!

Doing the above lets you know how much turnover you've received, how much in expenses you've paid out, and how much profit is left over. From this, get into the habit of setting aside money from your bank into a savings account or using Starling for its Spaces feature or Monzo for its Tax Pots feature. Set aside your corporation tax or your VAT for the month so you're not caught out when the deadline comes around.

Set aside a provision of 2 or 3% of profit to go towards new equipment or maybe what I call a 'Dream' pot - this is the opposite of a rainy day fund but follows a similar principle - this is a pot for you to dip into one day for that equipment upgrade, new staff member salary, the next step in your dreams or goals that you can achieve.

Avoid getting caught out spending all of the profit month to month and not leaving room for your taxes or for yourself and your business to grow.

Then, we have your business plan. We all have one of these, right? Not just the one you made when you first started but one you are returning to, updating, and checking your progress against. We have that, right?

Many people have a business plan when they start because it's what they are 'told' they need to have, the bank wants to see it, or whatever it may be.

Rarely do people go back and update their business plan year after year, and it's wild not to do so - we HAVE the map now. We have the ability and access to READ it with the technology we have available to us. We hopefully have a DREAM of where we want to go, be it one month, three months or 12 months from now. The business plan puts all that together so you can check where you are now compared to where you thought you might be, whether your ideal customer profile has changed, and whether have you exceeded your sales targets already for the year.

This doesn't have to be a strenuous or gruelling experience - it doesn't even have to be something you do every day.

Once a month, early on, looking at the previous month, you can get an idea of how the business performed, how it compares to your expectations, and the reasons for this.

You can then steer the ship (using the map - yep, we're now a ship AND map analogy!) in the direction by tweaking your goals and targets that you've set. Checking in with yourself or whoever you choose to share that with is so important to set you up for the next month ahead because otherwise, you're just wandering around, unsure where to go, hoping for the best.

Written and edited by Ben Nacca