Most small business owners do not review their numbers on a regular basis or understand what they mean.
Knowing your business numbers gives you clear insight and understanding into how the business is currently performing. You need to know this so you are able to move your business forward. It allows you to know when you need to check your sales channels, know if you need to hire employees, or if you need to add new products/services.
But let me ask you some questions and explain why they are important.
Do you know exactly how profitable your business is right now?
I asked this question recently in some Facebook groups and I was completely stunned by the answers! The resounding majority of answers leant to ‘NO’.
Some believed that whatever money was left in their bank account meant it was their ‘Profit’.
When you understand how profitable your business is you gain insight into if your business is actually making a decent margin for you to draw your wages from. Especially if you are a sole trader.
Do you know that your records are accurate?
When was the last time you did your bookkeeping? Do you know that the transactions in your accounting system actually match your bank statement?
Errors in your bookkeeping can make it really tricky to know what is making you money and what is draining it. And are they worth it?
If selling a product or service for $70 is costing you $100 then it’s not worth your time or energy.
Do you know how much and when your expenses are due?
Cash flow in a business is king, and if you don’t know what your expenses are going to be, how much and when they are due – then how can you plan for them? Hope you’ve got enough money in the account to pay them? Have to invest money back into the business to cover them?
When you’ve drawn a wage, but you have to invest that money back to pay your expenses when they come up, then it’s time you need to question those expenses and how much you pay yourself.
If you know where the money is going you can make informed decisions if they really are an essential expense, or if they are just a money suck.
One quick thing to look at is subscriptions. These can only be $10 per month each, but how many do you have? What benefits do they provide you? If they make your life easier or free up your time to spend it on revenue generating tasks – then they are an essential expense. If they are ‘nice to have’, but really you can get most of the functionality from another subscription you have, then you need to question if you really need to keep this expense.
You can read more about cash flow here.
What should you do now?
First and foremost – DO NOT FEEL EMBARRASSED!
If you are in this boat, you most definitely are not alone!
Then, you need to decide what you’re going to do about it! Set yourself a clear plan of how you’re going to get on top of your business finances. Do you want to DIY? Do you want to get some advice from a professional?
If you’re going to DIY then you need to sign up for my ‘Be Your Own Bookkeeper’ online masterclass!
Want advice from a professional but not sure with who? Bookkeeper? BAS Agent? Accountant? You can find out more about what each one does so you can decide who would be best to seek help from.
If you want to outsource and know it’s taken care of in the hands of a professional who will keep you informed and educate you on the finances within your business, then you can Contact Me and see how we can work together.