Money mindset: How to manage your small business finances

Key points

• Understanding the basics of cash flow
• Identifying a money mindset
• Creating consistency for growth
• Evolving and adapting a business

Complicated numbers and spreadsheets can send some people into fight or flight mode. Money mentor and accountant, Clare Wood, offers some practical tips for business owners struggling to understand their finances.

Helping the little guys

From extra maths problems on her lunch breaks, to competing in her high school Maths Olympiad, the self-described numbers nerd followed her father’s footsteps straight into an accounting degree after high school, followed by an immediate jump into the corporate world of finance.

Despite career success early on, Clare discovered her real passion lay beyond spreadsheets and shareholder reports.

“I used to work for big multinational global organisations that were making hundreds of millions,” Clare says. “Whereas when I’m helping small business owners to transform their finances to be making a lot more money, I can see the tangible results in people’s lives.”

Leaving her corporate career, Clare took a leap of faith to focus on helping others find financial freedom, translating valuable practices used by the big firms and companies into practical lessons for small business owners.

The dos and don'ts of cash flow

When it comes to acing your budgeting, cash flow and profit, knowing where to start can seem like an impossible task for many small business owners. Clare says the first step is simply understanding the basics.

“At an absolute minimum, everyone should be looking at their profit and loss statement,” Clare says. “I really believe that everyone should be creating a budget for a minimum period at least 12 months ahead.”

Understanding exactly what you owe, what is owed to you and when, and making sure that you’re staying across your cash flow is too often overlooked, according to the numbers expert. A misinterpretation of what cash flow is, and how it impacts your ability to generate profit for your business, is the most common mistake Clare sees with her clients.

“Most people don’t understand what cash flow is and they’re not really monitoring it,” says Clare. “So what happens is they have a tax bill that comes out of nowhere or a payment and suddenly they’re like ‘Oh crap, I can’t afford this’, and that’s a really scary place to be as a small business owner.”

Clare describes a budget as a 12-month plan, looking ahead at your business’ profit and loss. A cash flow forecast on the other hand, is a weekly forecast looking ahead for the next couple of months.

By taking the time to understand exactly how and when money moves through your business, any sole trader or small business owner can begin to see tangible results, according to Clare.

“I really support people to understand why they are doing something, the potential knock-on effects that it will have, and empowering them to still be feeling like they’re in control of the decisions that they’re making in their business,” she says.

How to rewire your money mindset

Any major financial growth begins with mastering your money mindset. The first step is to reflect on the influence money has had on your behaviours, expectations and beliefs.

“The first thing is really uncovering what is my money mindset? What are my beliefs around money?” explains Clare, who says it’s important to consider what habits you might have picked up from your parents when growing up.

From there, you can thoughtfully take some actionable steps to rewire your mindset to strive towards growth, which can look different for every individual. When it comes to your business, growth can be anything from consistency in marketing, to hiring a new team member or working with a coach.

“I’m a big believer that your growth mindset is what keeps you growing,” Clare says. “It means that you are constantly changing and evolving and adapting how you are doing things in business.”

Whether you dream of global domination or simply working less hours in the week, Clare insists being across your finances and understanding the basics will always be your greatest asset as a business owner.

“Profit is the most important metric that you need to know in your business,” says Clare. “So yes, growing your sales can be a great way to grow your profit, however, it is only part of the equation.

“Sales are sexy, but profit is what pays the bills”.

Next steps

Download our Cash flow forecast template (xlsx)