Tracking your money is a crucial part of owning and operating a business. Without knowing where your money is coming from and where it is going you’re slowly creating problems that will become insurmountable if you don’t address it immediately.
A good business owner creates a financial plan even before the business starts and that plan is revisited with regularity and check it against actual business data that you have. This is the way to find out if the business is performing within expectations or not. Corrections to the business should then be made to address any problems. Here are some steps you should take to ensure that you’ve got an effective financial plan:
Make sure your financial plan is well made
Ensure that your financial plan will provides you with a clear idea of the revenue you should ideally have every month, and also a projection of your monthly expenses. These figures shouldn’t be pulled from the air – consult business books or an accountant.
Make a monthly review
After you’ve made a financial plan, make sure that you actually use it. Look at your plan every month and make sure you are meeting the financial goals you’ve set and you’re not overspending.
Make the necessary adjustments right away
In every review you make, if you find out that your profits are not meeting your revenue expectations or your expenses are going way beyond your own expense projections, make immediate adjustments to the business to address these issues. Cut your overhead costs and look for ways to increase your profits.
You should think hard about making any new expenses. This obviously includes expenses that will benefit your business – for example, marketing or sales related activities. To do this properly, you should measure the potential earnings you will gain against the actual cost of implementing a new business expense. If the expense can potentially lose you money don’t scrap it immediately. File that idea and revisit it at a future time. Sometimes, the idea is sound it’s just the timing that’s off.
Hire people if it’s needed
Under staffing is not a sound business strategy because the business itself will suffer. If you need to get staff then do so, it’s for the good of the business.
Remember that profit is the key
Some people, especially the new business owners, have a problem distinguishing between profit and revenue. Even if your business is raking in the dollars, if your expenses are also as high then you’re not running your business efficiently and you’re ultimately losing profits.