I am hopeless when it comes to finances, maths was never my strongest suit and figures make my head hurt, however becoming your own boss requires an understanding of and taking responsibility for your finances even if you contract the services of a professional. How else will you know -how successful your business is, exactly how much money is flowing and out, or if your required taxes are actually being paid- if not doing it, or at the very least understanding it yourself.
In a bid to educate myself I made improving my financial knowledge – not just in business but in life in general – one of my top priorities, turning to a number of recommended and personally sourced books and online and offline resources to help me do so. And, one thing I have discovered is that managing your finances is not just about managing money itself, it is also about changing your mindset, attitudes, habits, mental perceptions, the value of your time and making money work for you and so much more. Once I understood that, my relationship with my finances and how I view and approach my business is changing.
Creatives are notorious for doing what they love over a high or steady income – starving artists anyone – and whilst I want to do work that makes me happy I need to eat and in the past I have made some choices that have led me down the path of the starving artist, not good! But reading financial planning books has got me thinking about the necessity to become financially savvy in a world where pensions no longer have value and recessions and redundancies are becoming more frequent. The latter two giving rise to more and more people starting their own businesses, as they attempt to seek financial security on their own terms.
Earlier I mentioned handing over the responsibility to a professional i.e. Accountant or bookkeeper, whilst this is certainly advised, what is not is doing so blindly. Not taking responsibility for ensuring that your hard-earned money is being managed properly or worse is not being spirited away and lining someone else’s pocket, and you only becoming aware when the ATM/Cash Machine flashes up ‘declined due to insufficient funds’. A scenario that is scarily true, given the horror stories often mentioned in the press. Your accountant works for you and a good accountant should send you regular updates without having to be prompted, but you still need to take the responsibility of checking your records and accounts and bank statements yourself.
You do not have to become a financial whizz, but even a basic understanding of how to monitor cash flow, read or maintain a balance sheet or income statement – things you should be doing on a regular basis – will help you to keep an eye on things. In today’s world, it is relatively easy to find free and paid-for resources from books, to seminars to online and offline courses and more.
Lastly, even if you have a business partner who is good with figures and is responsible for managing the money side of things, you still need to review the books and be aware of what is going on, because the words ‘I didn’t know’ is not going to help you should you have the misfortune of being caught out.
Are you taking responsibility for your finances or do you find doing the books a chore, how do you manage the process? Do share in the comments.
[Image credit: Tapiwa Matsinde]