STAN J TONOSKI,

 Entrepreneurial Coach

Making Business Better

The Challenges Of The Entrepreneur – Part 2.

Part 1

Money, Money, Money! It is always about the money, or the lack of it! Money is one of the most emotionally charged issues in our lives. Did you grow up in a household where it was taboo to talk about money? Did your parents only talk about money in private or did they argue about money all the time? Maybe you constantly heard there is never enough or the rich got rich by cheating others or money is the root of all evil or if you have money someone else has to do without. The negatives beliefs about money are all untrue, yet those beliefs run our lives and our businesses.

Money is totally an invention of mankind and unbelievably it is a social taboo to talk about it publicly. We fear the loss of money, and do not understand how it works or how to use it. The result is many entrepreneurs do not prepare a budget nor do they manage their cash flow. When it comes to money ignorance is not bliss.

In an earlier time in my life when I was in commercial property management I learned very quickly whether or not a tenant would succeed, was just getting by or would fail I could tell who would be closing their doors because they could not take it anymore or the bailiff would seize their goods for not paying the rent.

In working with those tenants and in working with my coaching clients I found that those who were most stressed are the ones who are great technicians and do a fabulous job of what they do. They are stressed because they do not have simple accounting, budgeting and cash flow programs in place.

You may recognize Joe. Joe does a great job of repairing your car. His work is impeccable and he understands the best way to take care of his customers is to go the little extra distance. He makes minor adjustments over and above the repairs so the car is safe and comfortable. He does it for free and he gives you a smile when he tells you about it.

Underneath though Joe is stressed. The signs of his lack of money management are everywhere. He has receipts from his suppliers in his pocket. The service counter is covered in papers and Joe has to search for Visa slips and your work order. While he is searching he finds some more overdue bills and a demand for rent from the landlord. Worse yet he finds some undeposited payments from three days ago. In the background the phone is ringing. Joe is not answering because the call display shows it is a creditor who’s account is over 60days.

Much of what Joe is going through could be eliminated or greatly reduced by some simple systems. Whether you are working out of your home office, doing a business part-time, or running a large venture, a budget is an essential tool. It does need to be complex. Even a simple budget will force you to look at the expenses you are likely to occur. The budget is a great planning tool and help you have a deeper understanding of where the money goes and comes from. It identifies those expenses that are desirable and those that are critical to serve the customer.  Joe must pay for electricity and rent to stay in business. He may want a new set of tools or a flashy front counter however they are not essential to serve his customers. Being able to identify where to focus his spending helps Joe reduce his stress and keep his suppliers happier.

Accounting for where the money is going to and where it is coming from on a regular basis is essential to know where the business is at any given time. The tools to manage and guide the business are your accounting records and your cash flow. Many businesses are cyclical. There are down months and peak months.

Whether or not your business is cyclical, the accounting records (when they are kept up to date) give you a bigger picture of where the business is at short term and over the fiscal year. The accounting can be simple or complex depending on the nature and size of your business. Personally, I only use the categories of expenses that listed on the income tax return. This simplifies the record keeping and the tax reporting. This also helps in making the required regular payments to the various governmental agencies.

The third and most critical component of your financial stress reduction and management is the cash flow. If you have cyclical business, a cash flow budget must be done at the beginning of each fiscal year. When you are caught with little or no cash coming in and bills still to pay you can then weather the quiet times.

A business networking colleague of mine, Ray, used to own a successful RV repair business near Terrace, BC. Business would start coming in the door in May, be really great through September and then slow down until it stopped sometime in November. Ray used to close the doors through to the end of April. It snows in Terrace and it gets cold. The premises needed to be heated enough to keep everything from freezing. At the very least, there were power and fuel bills yet there was no income. Good cash flow budgeting ensured Ray was able to pay the bills, feed his family and take a vacation during the off-season.

The other aspect of cash flow management is to maintain a record of all the money coming in and all the money going out, preferably on a daily basis. I have a client similar to Joe who did not have a record of his cash flow. Every time we talked he was stressed about all the money going out to pay bills and not enough money coming in. He did not see how the business was going to last. When he did implement cash flow recording on a daily basis as I had requested he quickly found the business was paying him well. The problem was he was using the cash to pay for old bills that were not related to the business.

If Joe had a simple up to date cash flow record he could reduce his stress by making sure the money was used in the best way to support his business. He could keep the people with the most power to close his business from knocking on his door - the governments and the landlord. He could manage his suppliers so that they all get paid over time and his business could grow and thrive. He may then find he can have his flashy new counter and new set of tools.

There are two more things in addition to the tools above necessary to deal with the money aspect of your business. The first is to get help. You do not need to do it alone. Hire a part-time bookkeeper or have your accountant set it up so you can run it. The second is to talk about money. Treat it for what it is, simply a method of keeping track to simply the exchange of goods and services. It is nothing more, nothing less. Ask other successful business owner, and managers how they manage the financial aspects of the business. Seek the advice of you bookkeeper and accountant. If you do run into hard times talk to you suppliers.

 Work with them to find a way to pay over time. In my experience in property management I usually found the landlord was willing to work with a tenant who was willing to communicate. The ones who avoided us and would not communicate honestly usually had their businesses shut down. All this additional stress and aggravation can be avoided by simple budgeting, accounting and responsible cash flow management. I believe business should be fun. Yours can be!

May your business be truly successful.

Best regards,

STAN J. TONOSKI

"Business is the art of extracting money from another man's pocket without resorting to violence."  Max Amsterdam

"Inflation hasn't ruined everything.  A dime can still be used as a screwdriver."  Quoted in P.S. I Love You