Running a successful business takes more than a great product or service. Behind most thriving businesses, there are solid financial habits that get practised consistently, not just when things get tight or a deadline looms.
The good news is that none of these habits require a finance degree. They are straightforward, practical and available to any business owner who is willing to be a little more intentional about how they manage their money.
Here are five financial habits that tend to separate businesses that grow from those that struggle.
They know their numbers
This sounds obvious, but it is surprising how many business owners do not have a clear picture of their key financial figures at any given moment.
Knowing your numbers does not mean memorising every line of your accounts. It means being able to answer a few fundamental questions without having to dig around for the answer.
- What did the business turn over last month?
- What are the monthly overheads?
- What is the current gross margin?
- How much cash is in the bank right now?
- What is owed to the business in unpaid invoices?
Successful business owners treat these figures the way a pilot treats an instrument panel. Not something to glance at once a year, but something checked regularly to make sure everything is on course.
When you know your numbers, small problems get spotted early. When you do not, they tend to grow quietly until they become much bigger problems.
They review finances monthly
Once a year is not enough. A lot can change in twelve months and by the time annual accounts are prepared, the information they contain can already feel like ancient history.
Successful business owners set aside time each month to review their financial position. This does not have to be a lengthy exercise, but it does need to happen consistently. A monthly review might include looking at:
- Income versus the previous month and the same month last year
- Whether costs are tracking in line with expectations
- Cashflow for the weeks ahead
- Any invoices that are overdue or becoming a concern
- Progress against a budget or target
The discipline of doing this monthly means decisions are based on current reality rather than outdated information. It also means nothing catches you completely off guard, because you are keeping a regular eye on the direction things are heading.
Many business owners find that once this habit is established, it also reduces financial stress significantly. When you know what is going on, things feel far more manageable.
They plan for tax
Tax surprises are one of the most common causes of cashflow problems for small businesses. A corporation tax bill, a VAT quarter or a self-assessment payment on account can all create real pressure if money has not been set aside in advance.
Successful business owners treat tax as a regular cost of doing business rather than an unwelcome bill that arrives without warning.
Practically, this means:
- Understanding roughly what your tax liabilities are likely to be throughout the year
- Setting money aside each month so the cash is available when payment issues occur
- Being aware of key tax deadlines well in advance
- Working with an accountant to identify any legitimate planning opportunities before the year end
It is also worth noting that tax planning is not just about minimising what you pay. It is about making sure your business structure, timing of expenditure and use of available allowances are all working as efficiently as possible for your situation.
Getting ahead of tax rather than reacting to it is one of the clearest differences between business owners who feel in control of their finances and those who do not.
They invest in advice
It is tempting, particularly in the early stages of a business, to do everything yourself. While that spirit is understandable, there comes a point where trying to handle everything alone starts costing more than it saves.
Successful business owners recognise that good advice pays for itself. Whether that is working with an accountant, a financial adviser or a specialist in a particular area, the right guidance at the right time can make a significant difference to outcomes.
Good financial advice goes well beyond completing a tax return. It can help with:
- Structuring the business tax-efficiently
- Understanding which costs can be claimed and how
- Planning director remuneration in a way that makes sense
- Identifying when the business is ready to take on a member of staff
- Flagging financial risks before they become serious
The business owners who get the most out of their accountant are usually those who treat the relationship as an ongoing conversation rather than an annual transaction. The more your accountant understands about your business, your goals and the challenges you are facing, the more useful their input can be.
Investing in advice is not a cost to be minimised. It is one of the better returns available to a growing business.
They track profitability
Revenue is not the same as profit and turnover figures alone can be misleading. A business can be growing quickly in terms of income while becoming less profitable if costs are rising faster than revenue.
Successful business owners keep a close eye on profitability, not just at the business level but across different areas of the business where that is relevant.
This might mean looking at:
- Gross margin and whether it is holding steady or drifting
- Which services or products are contributing most to profit
- Whether clients or contracts are profitable when all costs are factored in
- How overhead is tracking as a proportion of turnover
Profitability tracking does not need to be complicated. But it does need to be regular. A business that is growing quickly while margins quietly erode can find itself working harder for less, without ever quite understanding why.
When profitability is monitored consistently, it becomes much easier to make decisions about where to focus effort, which parts of the business to grow and where it might be worth having a conversation about pricing.
None of these habits are difficult. But they do require consistency and that is often the hard part when you are busy running a business day to day.
If you feel like your financial habits could do with a refresh or you would just like to get a clearer picture of where things stand, we would love to help. Call us on 01173 700 079 or drop us an email at hello@steppingstonesaccountancy.co.uk and we can have a straightforward conversation about what would work best for you.
