BUSINESS FINANCIALS AND MONEY
Everything your business does, show up in your financial reports.
“Money exerts a deep emotional influence on who we are, and what we tell ourselves we can never have. Our long unwillingness to understand the emotional and spiritual effects of money on us is at the heart of why we have come to know the price of everything and the value of nothing.”
“You can’t escape money. If you run from it, it will chase you and catch you. If we don’t understand our relationship to money in this culture, we’re doomed. If you don’t know how you are toward money, and really understand that relationship, you simply don’t know yourself. Period.” -Jacob Needleman
What I didn’t understand in my thirties about money is it would never take care of itself. I hadn’t taken the time to understand my relationship to it and my attitude toward money had a major impact on what ultimately happened to my first business. I lost it.
When I started my first Landscape Design Build business, I had very little regard for money. I had been involved in landscaping all my life, working as a laborer from the age of 10. My heart was drawn to owning a business from an artistic perspective. I thought I had something to contribute. I started with less than nothing, owing money to the bank for a truck and some tools. It was up to me to make something of it greater than what I borrowed.
I thought the artist in me was what differentiated my business from everyone else in landscaping. In my 30’s I thought my disregard for money would differentiate me further, ultimately making me a better artist and having a better business. I thought money was the root of all evil and that I could rise above it.
Now in my 60’s my thinking is less simplistic. I have seen how money can draw us together and can drive us apart. Age, and time lived, if we’re observant, grants us a bit of wisdom
What is money to a business? Value, Fuel, and Quantification
Finance is the regulation of money. It’s the accounting, budgeting, evaluation, and managing of money through a business.
Value – The value of your business is measured in money. The value of your business is what you can sell it for minus what your business owes. The tangible value of your business is the value of your assets minus your liabilities. There are intangibles that contribute to the asset value of your business. A Systemized business that runs without you has greater monetary value. Systemized businesses bring personal satisfaction, freedom, and lifestyle. Intangible assets like a systemized business based on values contribute to the community, the employees and to the society at large and bring greater returns when sold.
Fuel – Every aspect of your business requires this fuel, money, It’s vital to know how much you need and when you’re going to need it. Cash is the gas that powers your business. Your business should be generating cash through knowledgeable pricing, sales and efficient production. This should be the main way your business fuels itself. If your business uses more money than it generates, at some point you’ll run out of fuel.
Quantification is essential. Keeping track. Knowing what results your business produces. Understanding the monetary impact of your business is quantifying results. Almost everything your business does directly or indirectly involves money, your business is already quantifying itself for you. But it’s got to be more than just your bank balance. You must capture the financial information, make sense of it, and understand how to use it to manage your business in the present and budget for the future.
A systemized business that works for you is managed with an understanding of the numbers and how they impact your strategic objectives My next article will take a look at a few Financial Systems important to all value-based system run businesses. -dp