Financial Planning and Productivity
If you’re a business owner, you need to know your numbers.
Some of you nodded your head when you read those words. Some of you wanted to run away screaming, because you don’t think you’re good with numbers. And some of you nodded because you know it’s true, but at the same time knowing your numbers seems very difficult.
All of these are valid feelings. No matter how you feel, part of being a successful entrepreneur is knowing your numbers and what they’re telling you. October is Financial Planning month, and business owners need plans both personally and professionally.
There are a lot of myths about finances, just as there are lots of myths about productivity. And maybe that’s why my leap from one to another makes sense to me, even if it doesn’t to other people.
One of those myths is that one gender is better at it than another.
Neither men nor women are “right-brained”, and either gender can be good with numbers
Many of us learned in school that one side of the brain rules emotion and creativity and the other side is logical and rational. So creative, artsy types are either left or right-brained (I can’t remember which is supposed to be which and it doesn’t matter) and logical types are the other.
Except science has shown us that’s not true. Creativity and “artsiness” are in play in both hemispheres, as is logical thinking. (1)
I had someone tell me that men are supposed to be one, therefore women are the other. Men, of course, are supposed to be logical and women creative in this scenario. Obviously not true.
But are men better with numbers, especially when it comes to finances? Ha ha, no, of course not. In fact, women equity investors perform better than men. (2) That’s mainly because women trade less, and more trading undermines returns. Men tend to self-report as being more confident in their investing abilities, which leads to overtrading.
Yes, American culture tends to paint men as the numbers people and women as the nurturers. But you can nurture and be good with numbers too, just as many financial people I know like to paint or pursue other artistic pursuits (writing, in my case.)
Should you delegate the numbers portion of your business for a more productive day?
OK, so everyone’s equally capable of knowing their numbers. But you may not enjoy dealing with them. While your personality may not be dictated by one side of the brain or another, you probably have a preference for one or the other.
Playing to your strengths isn’t a bad strategy for business owners. Yes, we’re always supposed to improve ourselves and work on our weaknesses. But if you’re running a business, with all the hard work that entails, you need to enjoy it. And if you don’t enjoy finances anyway, you probably are better off delegating – SOME of it.
Even if you don’t mind playing with numbers, having a bookkeeper and/or accountant for your business is often a good idea. One less thing for you to deal with, plus the professionals keep up with tax changes and so forth. You don’t have time for that.
Having said all that, having a bookkeeper/accountant/fractional CFO still does not absolve you from the necessity of knowing your numbers yourself. While you don’t need to get into the nitty-gritty details of your financial records, you need to have a solid high-level overview.
What investments can you afford to make? Do you need to and can you afford to hire a new employee or contractor? How big is your company’s cash cushion?
Knowing the outlines of your finances and sitting down with your financial team will help you make smart financial decisions. It’ll also help you know if something’s going wrong with your money. When you have a grasp of your company finances, you’re a lot harder to trick or scam.
Having financial professional assistance can help you improve productivity
Having an overview of your company’s numbers is helpful, but sometimes you need assistance understanding what the numbers are telling you. An accountant can help you complete your tax returns, but they might not spot some red flags that you need to pay attention to.
Some accountants will perform this service for you. If your company’s big enough you may need the services of a fractional CFO while still being small enough that you don’t need to hire a CFO. They’ll spot red flags and tell you about any negative or positive trends that can help you guide your company to the goals you’ve set.
That way you can catch issues before they start harming your business. Preventing disasters is, as you know, a lot easier than trying to clean up after them! Not having to spend time cleaning up messes, and addressing issues before they get too big, leaves you more time to do what you need to do to keep your business on its path to success.
Recap (tl;dr)
It’s a myth that people are whether left-brained or right-brained, or that men are better with numbers and finances than women. Even if you choose to delegate your finances, you still need to stay on top of what’s happening.
Accepting the help of financial professionals can help you be more productive by freeing you up to focus on the necessary tasks in your business.
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