Small Business Finance Fundamentals, Part 5—Strategy

Lyle Mustard
Apr 12
4 min read

Financial management is more than transactions and tax deductions—it is one of the key pillars of your business foundation.

A good financial strategy turns numbers into decisions.

Strategy allows you to plan for growth, avoid cash crunches, and catch opportunities while they’re still hot.

Financial Strategy: What Does It Actually Mean?

Running a business is a journey.

Like a road trip.

Think of your bookkeeping as your dashboard and your strategy as your map.

The dashboard tells you when you’re getting low on gas… or if your engine is about to explode.

And the map tells you if you’re actually moving towards your destination and not just wandering around hoping for the best.

A financial strategy answers questions like:

Am I profitable?

More than just keeping money rolling in, you need to know if you have a net positive. Even a nonprofit relies on profit to keep the doors open and the employees paid.

Where am I leaking cash?

Recurring costs build up faster than you might expect, and unnecessary expenses don’t bring returns.

How do I plan for slow months?

Every business has its ups and downs, and good planning builds a raft to keep afloat when there’s deep water.

Can I afford to hire someone?

You can’t do everything by yourself, but what kind of support can you afford?

Am I using funds effectively?

Particularly in a nonprofit, donations and grants need to go as far as possible. Wise planning and diligent ongoing effort get the most bang for your funders’ bucks.

When you have a strategy for your finances, you are empowered to turn data into progress.

Managing emergencies and putting out fires is an essential skill as a business owner, but there is no point in lighting fires that you never needed to in the first place.

Without a strategy, you might not know where deadwood is piling up.

Turning Numbers into Smart Decisions

Now that you know the power behind a strategy, how can you put it to work?

Anyone can glue some metrics together and call it a plan, but you need to ask questions that produce answers with some real utility.

Profit is growing each month, but is it sustainable?

Are you overcharging and losing clients?

Do you have any revenue diversity?

What is your debt-to-income ratio?

Here are some metrics that can help you build a useful strategy:

Track trends, not just transactions.

Short-term transactions don’t tell the whole story. Are you growing over time? Is your revenue seasonal?

Know your break-even point.

How much income do you need each month to cover expenses? If you have a short month, can you make up for it the following month? Three months?

Plan for big expenses.

The last thing you need is to meet with a big expense in the middle of a cash crunch with no backup plan. Equipment replacement, tax bills - these don’t need to be surprises.

Keep a cash buffer.

Okay, so there are going to be surprises. But they don’t need to catch you empty-handed. Sooner or later, an emergency will find you. Have a buffer ready to shield you from the unexpected.

Use budgeting to stay in control.

More than just essentials and emergencies, good planning gives you the power to say “yes” when a big opportunity presents itself. Knowledge is power; in this case, it is the power to act.

Strategy can make the difference between a struggling business and a successful one. It asks the important questions that make the difference between keeping busy and making progress.

With the right tools and preparation, any business owner can become a serious force in the market.

But not everyone should take this all on themselves, and there is a time for every ambitious person to call for backup.

Let’s talk about when you should reach out for a helping hand.

When to Do It Yourself and When to Call a Professional

You don’t need to know everything about your business finances - only enough to know what you don’t know.

Know your limits, and you know how to keep your efforts effective and sustainable.

When to DIY

If your finances are simple, you might be able to manage on your own with some software and self-education. You will probably fare well if:

You have a small number of monthly transactions.
Your revenue sources are straightforward and predictable.
You’re comfortable using software like Quickbooks, or at least learning the basics in a short period.
You are caught up on basic tax obligations and filing deadlines.

When to Call a Pro

Your bookkeeping is eating up all of your time, and running the business is becoming a secondary focus.
You’re dealing with complex needs, like payroll, multiple revenue streams, or complex tax obligations.
Your cash flow is unpredictable, and you’re having trouble making a long-term plan.
You’re not 100% sure that you’re maximizing deductions or staying compliant with tax laws.
You want insight beyond just tracking transactions to build a bigger strategy that can forecast, plan, and optimize.

The Bottom Line

Good financial management isn’t about compliance, it’s about control.

Nobody knows what the market will do tomorrow, but having a process and a plan gives you the power to respond to whatever comes.

By now, you can see that your business finances are more than just numbers on a spreadsheet.

We talked about the basics of bookkeeping, cash flow planning, finances for nonprofits, taxes, and put it all together with strategy.