What do you do to manage your business’s financial health?
This question often stumps my small business clients. They often believe they’re in good financial health until something happens that throws them for a loop (broken equipment, tax troubles, cash flow issues, etc.). Panic sets in and they call for help.
How can you avoid a similar fate? Start by following my stress free plan for financial wellness!
Don’t Put off Your Bookkeeping Needs
Question: How can you judge the financial health of your business when you’re six months behind on your accounting?
Answer: You can’t.
The longer you put it off, the bigger and more overwhelming it’ll be and the more it’ll cost for someone to fix. Sure, it’s not your favorite task, but it’s necessary – just like flossing your teeth – so put on your big girl (or boy) pants and take care of business! Instead of trying to cram it all in at the end of the month (or year), break down that accounting mess into 4 tasks and handle one task a day:
Mondays: Invoices
Tuesdays: Bills
Wednesdays: Categorize Expenses
Fridays: Payroll
Not so overwhelming now, is it?
Get to Know Your Cash Flow
Now that you’ve entered everything you’ll start to see the bigger picture…cash flow!
What are your sales trends? Most businesses have fluctuations in sales – a restaurant will probably have higher sales during peak hours (nights & weekends), while a ski and snowboard shop will have higher sales during ski season.
Planning for these fluctuations in revenue is critical. Save money during high revenue times so you won’t come up short during low revenue times. Reduce expenses when sales are low – that new CRM software is fantastic, but it’ll be even better when it doesn’t break the bank.
And save save save for major unexpected expenses! When your backhoe breaks, your property taxes go up, or your pipes explode leaving your office flooded, you’ll be thankful for that rainy day fund!
Build a Budget and Use it Religiously
Those meal and entertainment expenses add up pretty quickly when you’re not keeping track. Most businesses don’t realize how much they’re spending on M&E, but it’s just one area that runaway spending can rear its ugly head.
Building a realistic budget for your business will allow you to determine which areas you should be investing in and which areas you should probably cut back. Now that you’ve got a good picture of your cash flow, build your budget around it and STICK TO IT! It’s completely useless unless you utilize it.
Budgets are ever-changing documents, so revisit yours often and revise it as your needs and resources change. Use it to plan your expansion to that new location downtown or to save for that CRM software you wanted!