Given the demands on the time and financial resources of small business owners, often budgeting is an afterthought – if it’s done at all.
However, if you don’t budget or somehow monitor your business’s finances, you are putting your savings, hard work and sacrifices at risk. You are abdicating control and allowing fate to dictate outcomes like income, losses or even the continuation of your business. An apt analogy is driving in heavy traffic with your eyes closed and hoping against hope that you somehow avoid a collision.
To take the traffic analogy further, you aren’t really in control of your business (large or small) if you can’t see signals and signs on the roadways: slippery surfaces, yield signs or stop and go signals. If you are working with bad numbers or no numbers you are increasing your business’s chances of running headlong into disaster. Unfortunately, with small businesses, micro and freelance businesses, operating without a budget or financial monitoring is quite common.
The Catch 22 of Running a Small Business
Small business owners sometimes have a misconception that accountants or bookkeepers that they hire to do taxes will monitor their business performance and inform them when they see danger looming on the horizon. Accountants and bookkeepers do not not (and cannot) provide much advice or monitoring if you are only seeing them once or twice per year. You’d have to engage them for these ongoing advisory services, and, as a small business owner you may not be able afford the monthly costs.
This is a classic “Catch 22”. You need to set goals and have an early warning system, and yet, you don’t have time or perhaps finances to do so. You also lack the expertise of a financial manager so may not feel confident that you can do it yourself. This is exactly why we created Flare. We wanted to give small business owners a way to really be in the driver’s seat of their business. We built in budgeting and a real-time financial dashboard so you can easily monitor your business’s financial performance. You can act as your own CFO because Flare makes it easy and provides at-a-glance visibility. Read more about all that Flare does.
|Barriers to Small Business Budgeting and Performance Monitoring||How Flare Empowers You|
|You lack financial management expertise.||You don’t need financial management expertise to use Flare. Flare’s|
budgeting, financial dashboard and interactive financial statements and
reports are easy to use.
|You can’t afford to hire a financial advisor.||Flare’s budgeting and analytics come packaged as part of Flare. For|
the cost of a few cups of coffee per week you get the features and tools
you need to create and monitor budgets and financial performance.
|You don’t have the time.||With Flare you don’t need that much time. In minutes you can create|
budgets and because Flare’s dashboard is automated, monitoring means
just clicking over to the dashboard. There, you’ll see a budget vs.
actual summary, key account balances, AP/AR and other performance charts
and graphs – all updated automatically.
|Your priority is running your business not creating budgets.||Once you’ve used Flare, you’ll find your priorities shifting because|
Flare has removed the barriers. You can easily create budgets, monitor
reports and take corrective action, so you will.
Why Small Business Financial Planning is Vital
While business failure rates vary depending on the source being cited, there is little doubt that risk of failure is high. According to StatsBrain, 25% of businesses fail within their first year and only 50% are still in operation at year four. In 2014, CNBC reported in the article Entrepreneurs: Their own worst enemy, that business closures outpaced new business starts. “While 400,000 new businesses are being created annually, 470,000 are closing”. David Goldin, CEO and president of AmeriMerchant, is quoted in the article saying that “The No. 1 reason people fail is, they run out of money”. The Small Business Administration cites different but equally alarming closure statistics (PDF). In 2009, SBA estimated that 552,600 businesses opened while 660,900 businesses closed their doors. Confusing or conflicting data aside, it is apparent that businesses struggle to survive.
StatsBrain suggests that the number 1 cause for failure (according to their sources: Entrepreneur Weekly, Small Business Development Center, Bradley Univ, University of Tennessee Research), is incompetence. Most of these were financial incompetence, including:
- Emotional pricing
- Non-payment of taxes
- Lack of planning
- No knowledge of financing
- No experience record keeping
The reasons for failure stated above are exactly why I founded Flare. When I first envisioned creating an accounting application, I wanted to focus on simple tools and easy-to-understand data that would help small businesses and freelance businesses thrive. I knew from my experiences that small businesses would benefit from similar techniques for success that are used by thriving big business. We created Flare’s dashboard, budgeting and financial statements and reports to do just that.
- Removing Barriers to Success