Updated: Apr 26, 2021
April 16, 2021 | Marcia Riner
Most small businesses struggle with finding ways to grow their income and revenue streams. There are many different ways that you can make more money in your business. We suggest you start by reviewing your current financials. This will give you clarity on your money and get you ready to grow your income.
Why do you need to review your financials?
Many small business owners don’t dig into their own financial books. They live by the balance in the account and often don’t review their actual expenses. Understanding your business financially is a critical step in being a profitable business. All business decisions should consult the company’s financials for feasibility and outcome. In my coaching practice, I created Power
Spending™️ it’s a method of making sure all expenses produce an income or ROI to be considered as an appropriate business expense.
How does it work?
All it takes is your detailed P&L if you have entered income and expenses correctly. If not, then it’s time to create a budget with your bank statements. By reviewing your income and expenses you can begin to eliminate unnecessary expenses and track your income. You should be able to notice gaps or possible problems, such as late receivables or higher than expected costs.
Here’s my 5-step Process for Reviewing Your Financials:
Step 1 - Follow your income
Find the trail to your income. Who are your customers? What products or services are they choosing more frequently? Do you have multiple income streams? What is your income model?
Step 2 - Analyze your debts
What are your monthly costs and non-monthly costs? What are your operational costs and costs of goods sold? You are looking at every dollar that goes out of your business. The top expenses are often people and places.
Step 3 - Prioritize expenses
Is that expense necessary for delivering your product or service? If yes, it is a priority. Next, determine if that cost is producing an income. If the expense is not a priority or producing an income. Trim the fat! It may only be temporary but by dropping expenses, it frees up important monthly cash flow. Managing your cash flow will allow for flexibility and opportunity as well as profitability.
Step 4 - Forecasting
Now that you have a handle on the incoming and outgoing money for your business, you can begin to anticipate what happens next. You can plan for upcoming purchases, manage the ups and downs of the business cycle, plan for growth and make decisions that will set you up for financial success. Without the review, you cannot forecast where your business will be in the future.
Step 5 - Invest in your business
You are forecasting your growth and it’s time to prepare your company for the needed support. It may be marketing, establishing systems and processes, purchasing or updating equipment, and hiring staff to help the business grow and support the existing customers. Planning for growth requires an early investment into the business.
This review will help you to gain clarity on your money to make the right decisions when looking to grow your business and its income.
Need some help?
No business owner should be alone on an island. Your accounting team may be able to help you create these reports but will be most likely lacking in the forward planning of your business. It takes a partner that understands what it takes to grow a profitable business with a tangible strategy that guarantees increased profit. Curious? Book a no-obligation, no high-pressure call to see how we can help grow your profit.