Teach your clients to love their numbers

Sooner or later your clients will ask for help making a decision; moving premises, buying a machine, hiring someone expensive.

Some business owners won't manage finances at all, some will use their monthly bank statement, a few will manage cash flow using spreadsheets.  Most will struggle to produce information in a form that helps make decisions.

Often you'll hear "I don't understand accounting” and that their only experience of financial reports is the annual return produced by the accountant. I’ll leave you to guess how thoroughly most of them go into that document.

When this opportunity arises, talk through the reasoning process.  For example the plan might need to support additional rent (and so costs) of x (this requires a brief discussion on fixed costs).

Perhaps employee costs up by y (this requires a brief discussion on fixed vs variable costs). Revenue up by z – this requires a brief discussion about productivity, gross margin and sales capacity. Help them figure out what net profit will be under a range of different capacities and turnovers.

At the end of this discussion you can introduce them to their profit and loss statement – which until now they might see as a baffling and irrelevant tool of the accountant – and show how it is an essential business tool – in fact, one you have just used.

Try to build on this (I hope) lightbulb moment and move on to their balance sheet and cash flow statement.

Expain that if you are the owner of anything but the smallest business you need to understand financial reports. To do that, you need to work through them each month.

If you want to find tools to help your clients understand finance, and other resources to help them run a better business, then take a look at www.businesscoachkit.com

This article is adapted from an original post on my website www.nickbettes.co.uk