Question: As a small business owner, how do I incorporate faith into the stressful job of managing finances?
Answer: Running a small business is as much about being a steward of Providence as managing personal affairs. It’s about using the talents the Lord has given you in ways that glorify him, provide needed services to the community and take care of your family responsibilities. To accomplish these goals, small-business owners must not only manage the operational side of the business, but the financial side as well.
Unfortunately, while small- business owners are often very gifted at the work they do, many haven’t developed the skills necessary to manage the financial affairs of the business. That makes the business less effective, and harms their ability to meet personal financial responsibilities.
Step 1: Embrace your role
The first two steps in the “7 Steps to Becoming Financially Free” program are:
Step one: Be a steward of Providence.
Step two: Assess where you are and develop a plan.
These steps aren’t only for personal finances. They also apply to how one should manage a small business. Scripture says, “Take good care of your flocks, give careful attention to your herds” (Prv 27:23). Your God-given role as a steward of Providence provides all the incentive you need to manage the financial affairs of your small business well.
The financial side of the business requires your direct attention. Because many small- business owners don’t have an accounting background, it’s the last area they want to spend time. Deep down, they know it’s a priority, but it ends up being one of those priorities consistently put off until tomorrow. That doesn’t work.
Step 2: Assess and plan
Once you embrace your role as a steward of Providence over your small business, you need to apply the second step: assessing where you are and developing a plan. You need to develop a system for measuring the operational and financial activity of the business that works for you. Your business needs periodic “check-ups” to gauge its financial health so you can know whether you are reaching your goals or not. Our boys have a hamster named Poky. Poky runs on the wheel in his cage — but never gets anywhere. Many small-business owners are like Poky, running hard, but not moving toward their goals.
There are many products to help small businesses better manage their finances, and I encourage owners to find the package that works best for them. For starters, many use Intuit’s QuickBooks (www.QuickBooks.com). It provides a solid set of tools that helps organize and analyze the financial side of small businesses.
But, for many business owners, it isn’t enough just to use a package like QuickBooks on their own. Without some basic accounting knowledge, mistakes are often made that make the information that comes out of the accounting system meaningless and, in fact, dangerous. Bad information leads to bad decisions.
Many small-business owners would do well to acquire the assistance of a qualified accounting service to facilitate the generation of monthly financial results. I recommend the monthly financial reporting package include a balance sheet, a statement of income and expenses and a statement of cash flow. It should also include supporting schedules to give the business owner confidence that the financial information presented can be trusted. This will include bank reconciliations, analyses of accounts receivable and accounts payable.
Just because someone else prepares your basic financial information doesn’t mean you don’t need to be involved. It’s important for you to understand how the numbers are derived, and what it means to the performance of your business.
It takes a little time to get the initial system set up, but by laying out a plan with your CPA and a reputable accounting service, you’ll be on your way to managing your small business in a way that honors the Lord and gets you on the road to true financial freedom. God love you!
Phil Lenahan is the president of Veritas Financial Ministries (VeritasFinancialMinistries.com) and the author of “7 Steps to Becoming Financially Free” (OSV, $19.95). Submit questions for columns to firstname.lastname@example.org.