What is financial control?
When we talk about financial control, what we’re talking about is knowing — and understanding — the money that your company spends and earns. How much you pay for office supplies and web hosting. The cost of advertising and raw materials. The amount paid by customers and clients versus how much you have to spend to provide your product or service.
True financial control empowers you to honestly assess how much success your business currently experiences, and gives you a roadmap to how you can grow.
Why so many people don’t have financial control
It comes down to the fact that a lot of people don’t like to talk about money. They steer away from financial discussions in their personal life, and it carries over into their business.
Look, a lot of us have had money issues in the past — some still do — and that’s okay. The only way to get past those obstacles however, is opening up about money. When it comes to succeeding in business, you must get comfortable talking about your finances.
It starts with mindset
Like so many things in life, successful financial control starts with your mindset. Do you view money in a positive light? Or do you think of it as a taboo, the root of all evil. Something that you want, but don’t want others to know that you want?
In all areas of your life, but especially in your business, you should want to earn money. Your business exists to solve your customer’s problems. Those solutions cost money to provide. The more money that you earn, the more problems you can solve.
So start thinking about money for what it actually is — a tool.
Money is a tool that allows your business to fix problems for customers and clients, and much like the carpenter’s hammer, this tool works much more effectively when used properly.
Financial control gives you a strategy to ensure that you’re always using money as an effective tool.
Want to take financial control of your business, but not sure how to take the reins? The pros at Business Marketing Engine want to help. Just drop us a line using our contact form, and we’ll set up a free consultation to discuss how we can help you take control of your company’s finances.
Understanding where your money goes
You’d be amazed at how many business owners we talk to that have no idea where their money goes. They have no idea how much they spend, how much supplies cost or how much they pay for advertising.
This comes along with an attitude of, “if we only make more sales, everything will work out!”
While sales are the lifeblood of a business, more income won’t help if your business hemorrhages money.
To avoid this, you must learn where you spend money. All of it. From how much you pay employees to how much you spend on marketing. Everything.
This sounds like overkill, but I guarantee it will pay off in the long run.
“But I don’t have time to track expenses!”
We hear it again and again. “I’m too busy to spend my time tracking down every penny!”
That might be 100% true. You may have too many other things on your plate, or you may not understand the best way to figure out where your money goes.
None of that negates the need for financial control. You may have to promote a trusted employee to manage financial control, or you may need to hire an accountant. Spending that money up front will yield amazing results in the long run.
Know how much you earn
When you know how much you spend to provide your product or service, then it becomes incredibly easy to understand how much you earn.
At that point, it breaks down to a simple equation.
“Cost of product/service to customer” – “How much it costs you to provide the product/service” = Profit
Multiply that by the amount sold and you’ve got a solid idea of where your business stands financially.
Simply put, you don’t know how much you earn from any sale unless you know how much it costs to provide what you sell. You can’t sell your way out of spending too much to provide your product or service. It just doesn’t work.
Find the right price point
When you’ve done the math, you’ll know how much you spend and how much you earn. Hopefully you have the right balance. If not, all is not lost.
If you spend more than you earn, you have two options.
- Spend less.
- Earn more.
Sounds simple, right?
In theory it is. In practice… Well that tends to be a little more difficult.
When it comes to spending less, ask yourself if you can source materials or supplies at a lower cost without sacrificing quality. Are you spending your advertising budget effectively? Are you targeting the right demographic?
The flip side of the coin is asking yourself if you’re charging enough. You can’t outsell expenses if the cost of business outweighs profits. Look at the problem you’re solving and have an honest assessment of whether you charge a sufficient amount for what you provide. Adjust accordingly.
All of this sounds perfectly reasonable, but the truth is that perfect financial control doesn’t happen overnight. Making the right changes will challenge you — even knowing what changes to implement is difficult.
That’s why we advise you to seek out help. If you have an accountant, they can provide you with good ideas about how to start taking financial control. At BME, we’re also eager to assist you in any way that we can. Think you might need some consulting on financial control? Fill out our contact form and we’ll schedule a free call to assess how we can best help you take your business to the next level.
Don’t let poor financial control hurt your business — schedule your free call today!