The other day, I was working with a client and I brought up a question about their sales for the month. When I asked what her sales were, she had no idea!
Then I asked how much she pays her assistant. Again, she wasn’t sure. “$100 a week? Oh no, I think it’s $200 a week.”
Now that’s a pretty major difference – that’s a $400 a month (or $4800 a year) difference!
Next I asked what kind of results she was getting from her assistant. “It’s hard to tell,” she said. “I’m not really sure how to determine that.”
This client has what I call Terminal Vagueness – a lack of clarity around money. Having vagueness around your money is one of the biggest issues many entrepreneurs face.
I have also been afflicted with terminal financial vagueness around money in the past. It resulted in a pretty bad situation where I was faced with declaring bankruptcy nine years ago. It was a tough time and highly embarrassing, but I will admit to my own shortcomings in this regard. I went into terminal vagueness when I made a big financial commitment but I couldn’t quite figure out how it was going to happen. I ignored my bank account. I slipped up on collecting my invoices regularly. I basically went unconscious around money. These habits are easy to slip back into in when we get afraid.
Obviously this is not good for business.
About nine out of 10 women that I work with do not have a clear picture of their finances. They’re not clear on their spending habits – either personal or business – and they’re not clear on their financial projections.
If there was one thing that I could instill in women entrepreneurs it would be this:
confront your numbers.
No matter what they are.
The beauty of your numbers is that they don’t lie. They don’t have a story. They just are what they are.
I now have a system for my business that is simple, clear and makes it super easy to manage my numbers.
These are the simple steps you can take to get out of financial terminal vagueness:
- Create a Spending Plan: this is the average of the last four months of spending in all areas of your business, like postage, health, rent, phone, etc.
- Create an Income Projection for the next 6 months: Get clear right now as of this moment how much income is already guaranteed to come in this month (meaning you have signed contracts in hand). Now project that out over the next six months.
- Balance Your Books: The next financial report that you need is a checkbook balance statement. You need to know how much is in your bank account now, and you can use your spending plan and income projections to determine what is coming in and going out. Can you cover it all?
You should be going through this process at least once a week until you are absolutely certain you are totally on top of your finances.
Getting out of terminal vagueness is one of the most important things you can do as an entrepreneur to keep your business alive. Don’t ignore your numbers any longer – they still catch up with you.