Financial readiness… what’s that? It’s something you’ll have probably heard about because a lot of business owners do talk about it, but it’s something that gets very much misunderstood a lot of the time, and that can be an issue.
The fact is that when people hear ‘financially ready’, they’ll usually think of a business with loads of money in the bank, everything perfectly organised, and no stress at all. But in real life, most businesses don’t look like that at all, and that’s because being financially ready really means being prepared, knowing where you stand, and knowing how to move forward. With that in mind, keep reading to find out more about what business owners get wrong about financial readiness.
Profit is massively important in business (you wouldn’t get very far without it), but that’s not what financial readiness is – at least not entirely. The fact is, you can be profitable and still feel as though you’re completely unprepared if your cash flow is all over the place and you don’t know what’s coming next month or if things are getting more expensive and so on.
In other words, a business can look really successful from the outside and still not be stable or comfortable behind the scenes – unless, of course, it’s financially ready.
A lot of business owners have the best of intentions when it comes to finances – they’ll plan to review everything properly, they’ll learn what the numbers all mean, they’ll build better systems… The issue is, they’ll say they’ll do these things, and they’ll mean it, but if they’re not doing it right now, they may well never get round to it.
Financial readiness comes from good habits, which is why doing the things you say you’re going to do, and maintaining them, makes sense. You can’t just sort everything out once a year and then hope it all stays working – you’ve got to keep an eye on things, and you’ve got to make it easy to do.
Revenue sounds like a good thing, and even an exciting thing, and it’s definitely the number people talk about most when it comes to business.
However, it’s important to realise that high revenue doesn’t automatically mean your business is a stable one. The truth is that if your costs are high, if payments are slow, or if you’re constantly reinvesting just to stay afloat, then the business might not be doing so well after all, no matter what the numbers actually say.
This is important, easily done, and very common – and you mustn’t do it, no matter how tempting it might be to. Yes, finances can often feel overwhelming, especially if you’re not normally a numbers’ focused type of person, and because of that, some business owners bury their heads in the sand and basically avoid looking too closely because it makes them anxious or because they’re worried about what they’ll find.
But the thing is, avoiding it doesn’t help, and really knowing your numbers, whatever they happen to be, means you’ve got control – if they’re good, you know what to keep doing, and if they’re bad, you know what to change. You can’t do any of that if you don’t keep an eye on things.
Some business owners think being on top of things means personally tracking every detail, but although you can do that in the beginning, it’s not something you can keep up with once you start to grow – it’s just going to get too much and you may even start to cut corners out of necessity.
The more a business grows, the more important it is to have systems in place to help you. That’s why tools that automate accounting, audits, and reporting with AI-driven workflows are such a good option for a lot of people, and a great way to be financially prepared. And the best part is, you’re not going to have to rely on just one exhausted person anymore.
As a business owner, you’re probably going to have some exciting plans for the future, and that’s what you’ll be working towards, no doubt. But you’ve also got to think about the less exciting things because those are usually the things that keep the business moving forward. We mean things like taxes, insurance, repairs, quiet months, price increases, and so on. These are just things that are going to happen whether you like it or not, and if you’re ready to deal with them, you can keep moving in the right direction.
In other words, you’ve got to plan for all those more dull things as well as the big ones that everyone’s going to notice – cover everything, and you shouldn’t have any nasty surprises.
A lot of business owners run everything really close to the edge, especially in the early years…
Again, it’s exciting stuff (quite a bit of adrenalin will be racing when you just about touch the line of what’s good and what’s bad), and it might feel like it’s the only way to do things, but the reality is that having even a small financial buffer makes a massive difference. That’s because when you’ve got one, you’ll have more options and less stress, and you’ll be able to make better decisions without being in a state of panic.
Financial readiness isn’t something you just tick off once and you’re done for good – it’s an ongoing thing and it actually changes as your business changes with things like new hires, new expenses, new goals, and new challenges.
Being ready financially is more like maintaining something rather than heading towards an end goal of finish line, so you need to be in it for the long haul, and make sure you’re checking – just because you’re financially ready one month, it doesn’t mean you definitely will be the next.