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Finance Learning Lab – Micro Course on Small Business Bookkeeping and Finance (Part 3 of 10)

In this lesson we’re going to pick off from the last one we went to and we’re going to talk about a discipline that you must start putting into place, starting this month. So we talked a little bit in the last lesson about how critical it is to have a financial plan in place for your business so that if it is middle of July right now, you know by the end of the month of July if you hit your goal financially. If the answer is, “Yes”, that’s amazing! Check in on it and keep doing more of the same or doing more of what worked. But if it’s, “No”, course correct and say, “Well if I continue to spend my time in the same way and my expenses in the same way, what makes me think that next month is going to be any different?”. So this becomes your discipline to be able to actually look back month after month to say, “What did I plan to have happened? What actually happened?”, and to course correct. Part of the reason why we actually chose the name of Finance Learning Lab is that it is a laboratory. And you need to start thinking of your business as being a series of hypotheses that you then test by executing different strategies. And then ask yourself, “Did I get the result or the outcome that I wanted?”. You’re always going to get a result, it just may or may not be the result that you intended. But you don’t want to keep running and testing the exact same thing over and over again. You don’t want to continue to do more and more of what’s not working. But if you don’t have any checkpoint to look at your financials and examine where you wanted them to be based on that time and effort involved, how do you know if you’re actually getting better? How do you know that you’re getting closer? You’re going to run into this hamster wheel where you’re doing more and more of the same thing. So this is an incredibly important discipline.

I think whenever you look at really large businesses, for example, whenever I worked in corporate previously, I was responsible for a portfolio with one billion dollars. And one of the things that I think small business can really learn from big business is that this regular cadence of review and the discipline of looking at your numbers and looking at where you want them to be is ingrained and it’s embedded into the culture. And so as a business owner, you want to model that. You want to start putting that in place. So my task for you right now is to go to your calendar and actually block off a period of time on the last day of the month where you’re actually going to look at your results. Now, you’re going to look at them and you’re going to want to ask, “Is it working or is it not working?”.

But here’s a question. If you are running your own business, what are you actually going to look at? So if you’re in a really big business you have the luxury that someone in a finance or accounting shop is just going to email you a document and you can take a look at it. What are you going to do if you actually don’t have something like that in place already? You’re going to need to build the processes to get the information and dashboards in place to inform your business. And that’s what we’re going to talk about in the next lesson!

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