Numbers may not be your best friend if you went into business for passion or creativity. Numbers need to become your best friend to stay in business for the long haul. Your business budget and accounting system should show you a full picture of what’s happening underneath the hood. It gives you insight to what aspects of your business are the most profitable and much more. Here’s why you need to review your financials regularly:
Stop Doing What’s Not Working
One of the top benefits of doing a business financial temperature check frequently is having the foresight to not waste time on areas that aren’t doing well. The end of the year is often the time where we circle back to recap the whole year before making changes.
The problem with this approach is that you could miss out on opportunities during the year. Check to see which jobs and clients are paying you the most money and think of ways to do more of those tasks. Consider putting an end to certain services that take up a lot of your time but don’t make a lot of money.
Keep Tabs on Your Cash Flow Before it Gets Ugly
You shouldn’t be waiting weeks or months to collect on invoices. One day you’ll wake up with a sad-looking bank balance and realize that you’re having a serious cash flow problem. Setting a weekly appointment to check your financials can give you the reminder you need to follow up on outstanding invoices. You can even hire a virtual assistant to help you send and collect on invoices so you can keep cash flowing properly.
Double Check Accuracy of Recurring Expenses
Business expenses these days are a lot like personal expenses. You sign up to put them on your card and the monthly transactions happen automatically.
When was the last time you reviewed your recurring bills to make sure they’re correct?
If you haven’t in a while, make sure your service agreements are matching up to what you’re currently paying. I caught a price discrepancy last week after comparing a recurring business charge with my plan. I was unaware I was being overcharged for about a month. Dig into the details because there may be money to save.
Look Beyond Revenue to Measure Your Success
You read a lot from business owners about revenue. We talked about expenses above, but I want to take home the fact that revenue is only part of the story. The full story should include a comparison of the expenses that are incurred to earn the money you do. Put plainly; your goal shouldn’t only be to increase your revenue. You may feel great about reaching your goal of earning $10,000 in one month, but if you spent $8,000 on ads and other operating expenses to earn it that variable needs to be considered closely.
Expenses can grow as your business grows so make sure that you’re bringing in enough profit to meet your own goals. Review the products and services that you invest in routinely. Ask yourself whether or not each of your business expenses are valuable. It’s true you may need to spend money to make money, but be smart with where you’re spending this money.
Looking at your business finances with a critical eye doesn’t have to give you a heart attack each time. You can only hide from what’s going on financially for so long before it will impact your ability to perform and pay your bills.
Business accounting is more than just sending and receiving invoices. The overall picture needs your attention as well. Thankfully, once you start committing to regular financial check-ins it gets less scary.
[Related: 3 Ways to Start Your Business Week Right]