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Why Turning Yourself into a Great Bookkeeper Kills Your Business Growth

Women business owners are good at money management, that is a proven fact! There are less female-owned businesses that go bankrupt than male-owned.

However, women business owners are not as good as men at growing and scaling their businesses, that is also a proven fact. There are many reasons for both statements:

  1. Women are more risk averse
  2. Women don’t have access to relevant networks to raise funds
  3. Investors do not invest in women-owned businesses (in fact only 4% of total VC investments go to women-owned businesses) 
  4. Women are overrepresented in the slow growth sectors
  5. Women tend to go in business to create work-life balance (and prefer smaller size businesses). 

All these above reasons are true and relevant to female solopreneurship and micro-business ownership. However, according to the survey that we ran amongst 100 women solopreneurs and micro-business owners, 68% of them see business growth as their main challenge. This means that even though women founders are more risk averse or want work-life balance, or prefer to work in the slow growth sectors, does not imply they don’t have ambitions for their business or they don’t want to grow their business. 

I decided to write this article to help women solopreneurs and micro-business owners in growing their businesses despite their risk awareness, their sectors of activity and whatever their ultimate expectations are from their businesses. The following 3 financial strategies will empower you to make safe yet bold decisions in growing your business to the level that fulfils you. 

Three strategies to bullet proof your business finances so that you can grow safely and build in the industry of your choice: 

1. Change your perception about your business finance. 

Every tax system and accounting practice gives us a retrospective perspective of our businesses. Filing your tax returns shows you what has happened in the past year, bookkeeping shows you how much you have already spent, your bank account shows you what has happened till now and where you are at now…

This perception of finances gives a false sense of security about your business. The retrospective data that you have can help you a lot, but unless you change your perception from looking at the past to looking towards the future, you can’t use this data to empower your decisions. So, change your money perception to a prospective one. 

What do I mean by prospective perception of finances? Well, you need to take your bookkeeper hat off and put a financial director hat on! An FD approves future expenses, contributes to the direction of the company by giving informed advice on the future finance of the business. A bookkeeper can’t do any of this. 

You are the owner of your business; you are the vision setter and as a solopreneur or micro-business owner you will take your business to its next level (whatever this means to you). All this is about the future, which means you need to know that will happen financially in the future.  Forecasting regularly and checking your income regularly, your expenses, future hires or investments is the only way that will empower you to make decisions that are bold while keeping your “risk anxiety” at bay.

2. Map out your business financial patterns

Depending on the type of business you have, you will have income and expenditure patterns – define them and forecast accordingly. 

A product-based business might see their income increasing before Christmas, an architectural firm might be able to project income depending on the real estate market trends, a service-based business might grow after a business convention. You know your business highs and lows so forecast your income budget accordingly. 

On the other hand, expenditure can also be forecasted. Annual subscriptions, monthly overheads, special training periods, gifting clients… all these can also be forecast pretty accurately. 

Knowing these patterns and aligning your forecasting with these patterns will increase your control over the future finances of your business.

3. Focus on cash, not paper

Your business does not run thanks to invoices… Invoices mean money owed! When the money will hit your account or leave your account is the only thing that matters. Your cash situation is the only reality of your business when it comes to be able decide on whether you should be investing in a VA or bringing in your first team member or stopping certain expenses or allowing a budget for your new website….

Only your future cash situation will give you informed answers on what you should be doing with your money today. 

Within this in mind I strongly encourage 3 practices: 

  1. Forecast your cashflow and do it religiously (you can download our free cashflow forecast template here).
  2. Create saving accounts for: 
    • Profit
    • Taxes (when and if applicable) 
    • Overheads
    • Your personal expenses / salary 
    • Operational expenses
  3. Save your money according to different margins and in order of priority as set out above. 

First of all, depending your income flow (sporadic, monthly, weekly, daily) you need to set time for this activity. The idea is to open several saving spaces in your business account to allow dispatching the income that hits your account. 

Here is how you need to do…

Profit: every amount that touches your account should have a percentage of profit… take it immediately, put it in your profit account and DO NOT TOUCH IT! (Read ‘Profit First’ to better understand the reasons why and the impact of this technique) 

Taxes: Depending on your income, you are liable for paying certain amount of taxes on the profit that you make – put the relevant percentage in your tax account.  

Overheads: Put aside your monthly recurring expenses (salaries, rent, subscriptions, etc.) Again, this will be a percentage of your income that if you know, you will be able to take that percentage slowly from each payment that enters in your account

Your salary: Depending on your personal situation, you might need to be flexible on this part and sometimes go low, sometimes go high! ☺ 

Operational expenses: These can be reduced or increased depending on your income – leave this in your regular account. 

Depending on your income and business stage percentages will be always different. In service-based businesses, I think it can be safe to say that you should be aiming for a minimum of 20% profit margin, which can’t be expected at the start of your business. The profit margin might be higher after income is regular and growing, and the levels of reinvestment in the business are lower.  

The most important thing is to make sure that the percentages are revised regularly with retrospective data from your bookkeeping. 

These 3 strategic practices are not just the foundation for healthy business finances but are the only way for women entrepreneurs, who are so-called “risk averse”, to make an informed decision about where they can take their businesses and how to do that. This level of understanding of your business’ future finance can only encourage you in taking a step that will fulfil you and will be aligned with your own expectations.  

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