Entrepreneurs, your bank balance doesn’t reflect your success

Credit to Author: Shalini Dharna| Date: Tue, 05 Dec 2023 01:03:53 +0000

I can’t count the number of times that I have done reviews with a client and told them their bottom line was profitable, only to be asked “so where is it?” Having a negative bank balance doesn’t necessarily mean you don’t have a profitable successful business. It does, however, mean you have a cash flow problem. Cash flow management is the hardest part of entrepreneurship. Cash flow is the lifeblood of any business, and effective cash flow management is crucial for entrepreneurial success. Without proper management, even profitable businesses can face severe financial challenges. In this article we are going to explore cash flow management and provide some tips on how to manage it.

Separate business and personal expenses

Is the problem your business has cash flow problems, or is the problem your personal cash flow problems?  When your business and personal expenses are all meshed together, answering this question is next to impossible. Instead of paying for personal items from your business bank, get into the habit of paying yourself once or twice a month and using your personal bank for personal transactions. Then, you will be able to effectively analyze how much the business made and paid you vs. how much you spent on your personal needs.

Detailed bookkeeping

Do your numbers tell the story of what’s working, and more importantly what’s not working in your business? Setting up the chart of accounts accurately to track and reflect what’s happening in your business is crucial to cash flow management. If you can’t answer the question of where your money is going, then explore the bookkeeping process to see how you can better track your cash flow.

Manage your expectations

In the beginning stages of a business, or in the midst of scaling up, your cash out flow may be higher than your cash inflow: that’s normal and okay. During these times it is important to stay on top of your cash flow expectations. Start by creating a cash flow forecast that projects your future income and expenses. This will provide you with a clear picture of your expected cash inflows and outflows. Regularly monitor your actual cash flow against the forecast to identify any discrepancies and take proactive measures to address them.

Track KPIs

As entrepreneurs, it’s easy to equate financial success with overall success. Financial statements are great but they are not the be all and end all of entrepreneurship. Set up other key performance indicators that matter to you and track those. For example, the types of clients you have. As you get more established, maybe you can say no to lower caliber clients in exchange for higher value ones. What other ways can you measure your entrepreneur success outside of just your bank balance?

The journey

Success should also be tied to the sustainability and resilience of your business. Building a strong foundation, establishing ethical practices, and prioritizing long-term viability are indicators of long-term success. It’s not just about generating short-term profits; it’s about creating a business that can withstand challenges, adapt to market trends, and thrive in the long run.

The last, and I believe most important aspect of measuring success for entrepreneurs is personal fulfillment. Having a sense of purpose, enjoying what you do, and feeling content in your endeavours can make a significant difference in your overall well-being. Money may bring temporary happiness, but true fulfillment comes from aligning your business with your passions and values. Recognize the importance of work-life balance, nurturing healthy relationships, and finding joy in the journey rather than just focusing on financial gain.

As entrepreneurs, it’s vital to shift our perspective on success and move beyond the narrow focus of bank balances. While financial stability is undoubtedly essential for business sustainability, it is not the sole measure of success. By considering these alternative indicators, and following some practical advice, entrepreneurs can redefine success and find fulfillment beyond monetary gains, ultimately leading to a more balanced and meaningful entrepreneurial journey.

The post Entrepreneurs, your bank balance doesn’t reflect your success first appeared on Canadian Immigrant.
http://canadianimmigrant.ca/feed