Jump to the bottom to hear Shannon explain this.
As a small business owner, you may think you have a numbers problem, but what’s really underneath it is confidence in your numbers. And if you feel unsure, you’re not alone.
You didn’t start your business because you love financial statements. You’re not an accountant, and you don’t have to be. But your numbers do matter more than you think.
This Isn’t About Being an Accountant
You don’t need to learn every accounting rule or understand every detail. You just need to understand enough to feel confident in the basics.
Think of it like learning the basics of your business finances—the same way you learned the basics of running your business in the first place. It builds over time.
If you hear a new term or your accountant explains a new topic to you, don’t just say, “Oh I don’t understand.” Take it to that next step and research it, ask questions and make sure you understand at least a little bit about it and how it impacts your business.
What Small Business Owners Are Missing With Their Financials
As a CPA working with small businesses, a lot of the conversations I have with business owners are about how they do not understand their financials. They receive these financial reports each month and don’t even know where to start.
Since they don’t feel confident reading or understanding the report, many of them don’t open it at all. For many, this happens every single month and they go months, if not the whole year, without even knowing their numbers or some of their key metrics that drive their business.
Why Small Businesses Struggle to Grow
The problem with these types of businesses is when we do meet and have conversations, sometimes it feels like we’re having the same conversation over and over again.
Usually, it’s because we’re explaining what happened the prior month or quarter, or we are discussing a continuous problem that comes up each time we get together. The client isn’t making the necessary changes or using their financials to measure progress. In reality, the business is somewhat at a standstill because we are never able to progress to that next level beyond the status quo.
On the other hand, some owners are very involved. They know their numbers, ask great questions, and understand what’s happening in their business.
One client that comes to mind knows his numbers inside and out. He knows exactly where he is each month and if he hit his goals or not. He focuses on a few key metrics and always knows the reasoning behind a deviation. I asked him how he stays so on top of his numbers. He mentioned that reviewing his financials is part of his routine. He has a specific time during the month set aside for it.
Our meetings with this client are never about explaining to him what happened in his own business during the month or quarter. It’s about strategizing what he can do to put himself in a better position in the future. Because he reviews his financials regularly, our conversations become more productive. We can focus on decisions, not just explanations. We can look ahead for planning and advisory, instead of only looking back, which is where we can truly provide value.
The first group isn’t necessarily wrong. You were probably never taught how to read financial statements either. But there is a difference in how these businesses operate and grow.
When a business owner understands their numbers, everything changes. They have confidence in their numbers and where the business stands. They can refine their operations using the current month’s numbers and improve specific areas of the business from those insights. And most importantly the business owner feels more in control.
Meanwhile, the second group is still shaky on what the financials actually mean because they seldom look at them or try to understand them. They may be making shot-in-the-dark decisions based on emotions or current fires that are happening in their business, without relying on the understanding of the historical numbers as well as where they are right now and where they want to be.
Your Accountant Can’t Run Your Business
Even if you work with an accountant or an outsourced CFO, you are still the one making the day-to-day decisions.
We can help explain what happened and help you plan. We can point out risks and opportunities and answer questions to better advise you. But we are not the ones making purchases, hiring staff, or setting prices. That’s you.
And the more you understand your numbers, the better those decisions become.
What Confident Business Owners Do Differently
The business owners who feel confident with their financials don’t know everything.
But they do a few simple things consistently.
They look at their financials regularly, even if it’s just once a month.
They focus on a few key numbers, like cash in the bank, profit, and major expenses.
They ask questions when something doesn’t make sense.
They take time to learn, little by little.
And they stay involved in where the business is going.
Where to Start
If you’re not sure where to begin, keep it simple.
- First, ask your accountant what you should be paying attention to. Ask them questions. Are there any key problem areas or issues in your financials?
Are there key phrases that your accountant is saying or that you’re hearing on social media that you just don’t understand? Take the time to look into these further and make sure that you understand them and how they would impact your financials and business.
- Second, pick two or three key numbers or metrics to focus on that will make the biggest impact. Do you need to increase revenue? What is your goal number, and how are you going to track your progress toward it?
Or do you need to cut expenses? If so, which are the major expenses that are bogging down your business and what changes can you make that would have the biggest impact? Is it evaluating payroll and capacity? Does this include hard decisions like cutting somebody’s hours or eliminating that position completely?
Are you over-leveraged on your balance sheet and do you really need to make a plan to pay down debt? There are so many areas that you could decide to focus on. But pick 2-3 that will actually make the biggest difference in your cash flow, how you feel about your business, and how your business is able to perform and grow.
- And lastly, but most importantly, stay curious.
Ready to Feel More Confident?
If you’ve been avoiding your financials or feel unsure about what your numbers are telling you, you’re not alone.
And you don’t have to figure it out on your own.
At Universal Bookkeeper, we work with business owners to help them understand their numbers in a clear, practical way—so they can make better decisions and move their business forward with confidence.