Finance in Focus: Building Confidence in Your Finances — Even in This Economy

Editor’s Note: the following column ,”Finance in Focus,” was first featured in the Square Banking newsletter. For this article, Licensed Mental Health Counselor Aja Evans, who specializes in Financial Therapy, reacts to business owners’ comments on money. Aja owns and operates a private practice in New York City.

Aja Evans is not an employee or consultant of Square and the views expressed in this article are solely those of the author and are not endorsed by Square.

This article is for educational purposes and does not constitute legal or tax advice. For specific advice applicable to your business, please contact a professional.

Have you ever wished you could just snap your fingers, and just like that, all your business finances would be handled, organized, and optimized to reach your goals? For this month’s edition of Finance in Focus, Licensed Mental Health Counselor, Aja Evans, who specializes in Financial Therapy, shares her perspective on why it’s so daunting to face the numbers, and how to gain confidence in your business finances. 

Getting comfortable with uncomfortable money situations

You’re not alone if you’re worried about (or have felt squeezed by) inflation, The Great Resignation, a lingering pandemic, and so many more current economic events.

Firstly, economic ups and downs are normal. You can ride them out with more certainty by having a strong understanding of your cash flow and expenses. Digging into your business finances can be an uncomfortable process, though. Everyone brings past money experiences into how they think, feel, and handle their business finances.

“In my family, money was always a concern. It was my mom’s biggest stress. That’s something that carried over to me. I’ve had to be mindful that money comes and goes,” says Roxanne Crisp of Crispy Brows Studio in Burbank, California.

Financial Therapist Reacts
Aja says, 
Money does come and go, sometimes much quicker than we would like. It’s important to be aware of whether or not this mindset can lead to avoiding your money or operating closer to margin lines than you need to. The tricky part of our emotions and past experiences is that we do not always know when a limiting belief is impacting how we function. This is particularly true in adulthood when so much of our money foundation comes from childhood.

Knowing the hard number of what you and your business need to survive may help you feel secure. A business fallback fund, a sum of money you have saved that can be used in times of need, may help in adding to the level of security when business is slow.

Reflecting on what you’ve learned — and overcome

In a March 2022 survey, 1,200 small business owners were asked text about their biggest challenges:

  • 48% said inflation
  • 45% said cash flow
  • 36% said low sales
  • 42% also said they’ve experienced burnout in the past month, confirming the past year has taken not only a financial toll, but an emotional one, too.

Yet, in spite of current economic hurdles, these same business owners had also made proactive changes to soften the negative impacts of inflation:

  • 27% built up cash reserves
  • 23% preemptively raised prices
  • 21% purchased more inventory

Financial Therapist Reacts
Aja says, 

Change is hard! But nobody knows how to rise above challenges like small business owners. The proof is in your constant ability to adapt to an ever-evolving landscape. How have you taken time to recognize what your business has overcome? Did you launch a new product or offering during one of the hardest times for business owners? Take a moment to recognize the effort you have been putting in to make your business work. 

Then, give yourself time to reflect. Are your original offerings and processes still working? What lessons did you learn over the last three years and how can you apply them to stabilize your business during times of uncertainty. If COVID has taught us anything, it’s that we shouldn’t wait for the crisis to happen to act. How can you prepare your business to ride the ups and downs?

Having a clear picture of your finances will help you make short — and even long-term business decisions — with confidence. 

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Finding your financial rhythm

Whether you start your business with a wealth of financial knowledge or no clue how to manage the books, you’re the very first person who’s ever figured out the financial side of your unique business. There’s a learning curve for everyone, and the more you learn, the more capable you will become. 

Vanessa Acosta of Wasi Clothing in Los Angeles, California, recalls, “I was not at all thinking about savings or money when I started my business. I just had a horrible fashion industry experience that I was like, ‘Let me get out, and I’ll figure it out as things go.’ That was back in 2017. I didn’t really have a financial plan.”   

81% of business owners handle their business finances themselves.

Financial Therapist Reacts
Aja says,

Oftentimes, business owners don’t think about themselves as an “expert” or believe they have the “qualifications” to handle their own books. This is just not true. Nobody knows the business like the people who poured their blood, sweat, and tears into building a business from the ground up. 

Accounting and bookkeeping doesn’t have to be a perfectly balanced, organized, formula packed excel spreadsheet. If that is how you do it — amazing! But one size does not fit all. 

When you think about doing your own books, what comes up for you? Are you worried you don’t know what you are doing, or more concerned about the system you use? Let’s get honest about what barriers your negative inner voice is telling you about managing your numbers. Noticing your negative narratives around money is the first step to having a healthier relationship with money.

Seeing your finances with clarity and confidence

When you have a detailed, accurate view of everything coming in and going out, you’ll be able to make more informed decisions for your business.

During a 10-week pandemic-related closure in 2020, Megan Marron of Salon Madison James in Taylorville, Illinois understood her business finances well enough to know a loan from Square would be a better fit for her salon than a PPP loan.* “For me, I don’t have payroll, which is basically what the whole thing is about — to protect your paycheck. Having a payroll system in place, it was a lot of work that didn’t feel necessary.” Megan used her loan to create hair care packages for porch drop-offs, bringing in revenue during lockdown.   

For Vanessa of Wasi Clothing, she’s been able to set her sights on longer term plans,* “I have savings now. I’m building more money and have goals to grow the business. I’m now starting to hire employees. So there’s a lot more money coming in and out. Now that I’ve built this business where hundreds of thousands of people are looking at it, it’s time to be responsible with that money, to have savings, to apply for loans, to look for capital, to look for investors, to be able to grow this business and invest more in it so it can grow and provide more for the customer.”

Financial Therapist Reacts
Aja says, 

Confidence in your numbers allows for more stability for potential growth. When you know what is coming in and out of your business you know what is needed to keep everything up and running. Those numbers will inform when you can take on more risk like hiring or expanding. Those tasks take confidence as well, not only confidence in yourself, but confidence in your business.

Still not sure where to get started? Check out these resources from Square: 

  1. Discover how business owners use account reconciliation to ensure the books are accurate
  2. Brush up on the five financial ratios business owners should look into

Sources and disclosures:

  1. Capital One: Inflation Not Dampening Small Business Confidence

  2. QuickBooks Survey: More Than 40 Percent of Small Business Owners Identify as Financially Illiterate

  3. All loans are issued by Square Financial Services, Inc., Member FDIC. Actual fee varies. Subject to credit approval.

  4. Savings accounts are provided by Square Financial Services, Inc. Member FDIC. Annual percentage yield (APY) of 1.00% as of August 1, 2022. APY subject to change. No minimum balance, no cost.