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As business owners, we focus most of our energy on MAKING money. How can I improve my sales? Do I need to rebrand? How many likes did my post get? Is my copy converting my website visitors?
These are all valid and important for the livelihood of your business. Unfortunately, we forget that what we do with the money once it hits our bank account it's equally important.
Think about your business income this way.
Business A makes 100K each quarter. The expenses add up to 80K each quarter.
Business B makes 100K each year, and total expenses are 20K.
If we follow the model that profit = revenue - expenses, both end up with 80K in their pockets at the end of the year.
Knowing where the money is coming from and where the money is going on a regular basis will help you see those results in real-time. What you can do with that information is transformational. You have now gained control of each dollar.
And asking questions tends to be a really good practice when "meeting" with your numbers.
Are my effort and load coherent with the money I received?
Do I struggle with receiving payments from clients?
Is the way I'm spending my money organized and compliant?
Is the way I'm spending making sense to me, my values, and my vision?
Looking at a screen with your numbers listed clearly can help you answer those questions, making your decision process much easier and less scary or stressful.
How can you make this process work for you?
Use a system that you like and know you'll use and a system that supports your business in the future. What I mean by that is pick something that can grow with your business smoothly.
Keep in mind that whatever goes into this system will come out. Every single transaction you record will show up in financial reports. If you want clear and precise data, make sure you're including Vendors' names, an accurate description, and that you're using the correct account.
Reconcile every single month. The reconciliation process is when you match your bank statements to your records. Don't forget to track every account you use, whether it's banks, credit cards, merchant/payment processors. They all need to match and be checked for accuracy.
Turn this data into real and useful information.
Once you've completed a month (or more) of tracking your money, you'll have the data you need to pull your Profit and Loss. Schedule 15 minutes to look at those numbers. It's going to be weird and uncomfortable in the beginning, but it'll get much easier, and you'll get more out of it as you keep up this practice.
You can also use this time to pick up on "clues" or signs that something is off. For example, do you constantly have NSF fees because you didn't get paid on time?
This might be a sign that your invoicing/receiving payments process needs a makeover. Perhaps you can automate payments or simplify the way your clients pay you. The easier you make it on them to pay you, the higher chances you'll have at actually getting paid.
Another list to consider is your expenses by Vendors. Where is your money going on a regular basis? Remember, the way you manage your money is equally important as making that money in the first place. We all have our own journey, priorities, and goals. Make this process enjoyable for you by truly making it YOURS. And just like any other habit, simplify it and schedule it. Trust me. You'll see a huge difference in your business after you've implemented this.
Do you know anyone who could use this help? As a bookkeeper and owner of Liquid Cents Bookkeeping I help women consultants, coaches, and therapists get a better understanding of their finances and keep their finances organized. I'd love to meet you! Book your free consult here.