The ABCD’s of a solid financial system
An entrepreneur starts out with an idea of a product or service. Couple of months later, he/she realizes that something is missing. Income is coming in but yet there is no real progress in the business. This normally happens somewhere between Level 1 and 2. This is the point where most entrepreneurs realize they need a financial system if they are going to survive.
The journey from idea to financial independence is never an easy one. It is filled with lots of uncertainties, difficult decisions, impossible paths, etc. While having a financial system will not prevent adversities from affecting your business, it will give you a more solid anchor in handling the adverse events that come your way.
LifestyleCPA takes you on a journey on how to build a solid financial system right from the creative phase of growth to the optimized phase. If you refuse to build a financial system, your business will surely but slowly dissipate. Businesses rarely crumble in a day but slowly and surely overtime, bad decisions eventually catch up: choosing to do nothing is one of the worst decisions you can choose to make. Learn to build systems around your ideas so you can become truly financial independent. Any business that is going to survive the long haul must have a financial system. A financial system affects every area of the business, and works hand in hand with the marketing and operational system.
The ABCD’s of a solid financial system are as follows:
A – A mapping system i.e. an overall strategy
- Define your business purpose: a business purpose fuels every part of a business. Without a clearly defined purpose, a business might as well not exist. A purpose is the filter that clarifies what opportunities to accept and which ones to reject.
- Develop your map from idea to financial independence
B – The budget
- Define your revenue generation system: any business that is going to survive needs customers and needs a system to reach and maintain them (marketing).
- Define your cost structure
- Address cash management issues
C – An accounting information systems
- Generate regular financial reports
- Understand basic accounting principles
- Understand your financial statements
- Compare financial statements to budgets
D – Optimization
- Develop your internal business processes: this is the system that governs the day to day running of the business. It is the vehicle through which the system carries out its purpose. Internal business systems are mostly driven by external forces and as a business owner your choices are to comply, improve or die. As an entrepreneur you face the pressures of meeting consumers’ needs, changes in the economic and legal environment, etc. These external changes force entrepreneurs to continuously improve.
- Develop metrics to monitor set goals: Metrics are the first indicator that something is wrong. When a metric does not give the expected results, investigations will need to be conducted to find out the cause.
Building a solid financial system
When your system is optimized then you could effectively partner with others with a shared mission and vision. This allows you, the entrepreneur to walk away and still earn income.
I invite you to come on this journey with me and let me help you BUILD TRUE FINANCIAL INDEPENDENCE in your business.