It’s great to have a nice website, a regular sales process and glossy business cards for your small business. All of these things steer sales, and sales is the engine that drives business. You must look credible in order for a corporation to do business with you, and you must have relationships to make a sale, and people must know where to reach you so business cards are important–but before you make any decisions in your business–you need up-to-date financial information about how your business is doing under the hood.
By the 15th of every month, you should have three financial statements which should include a balance sheet, income statement, and a statement of cash flow. These statements will outline the previous month activity including what sales were made, who has paid you and who you owe, and how much cash you have on hand to make it through the next month.
Once you put a process in place to generate monthly financial statements (such as hiring a bookkeeper to reconcile your accounts monthly and generate the statements), get into the habit of referring back to your financial statements and annual budget for information. Do not make business decisions based on what the account balance is online. Also, do not make decisions based on what you want or think you need for your business. Ask yourself or your staff WHY three times before making any purchases.
Always refer back to your budget and see what it says you have planned to spend, before committing to purchasing equipment, hire consultants or plan on attending any conferences. Also never purchase a booth at a trade show the first year you plan to attend–walk the show the first year. Talk to the other vendors about whether they got their money’s worth. It costs a lot of money to attend conferences–be sure it’s the right place to engage your niche target customer. Here are four financial tips to keep in mind in your small business.
- Use a budget–Manage your business with an annual budget. In October, start working on the budget for the following year.
- Monitoring profit margins–It’s fine to know your gross revenues, but in the end, it’s really all about the profits you keep. In every sale, know how much money is for you.
- Understanding the cash position daily–Cash is king. A business with contracts and no cash will soon be out of business.
- Know your numbers by the 15th of every month–Do not wait until tax time to deal with your financial statements. Have them complied monthly, so that you can know where you stand as a business.
What other financial tips should small business owners keep in mind? Add a comment below.
For more tips on starting or growing your small business subscribe to Melinda Emerson’s blog at www.succeedasyourownboss.com
Melinda F. Emerson, known to many as SmallBizLady is one of America’s leading small business experts. As a seasoned entrepreneur, professional speaker, and small business coach, she develops audio, video and written content to fulfill her mission to end small business failure. As CEO of MFE Consulting LLC, Melinda educates entrepreneurs and Fortune 500 companies on subjects including small business start-up, business development and social media marketing. She has been featured on NBC Nightly News, the Tavis Smiley Radio Show, in the Wall Street Journal, Entrepreneur and Black Enterprise Magazine. She hosts #SmallBizChat weekly on Twitter for emerging entrepreneurs and publishes a resource blog www.succeedasyourownboss.com Melinda is also the author of the national bestseller Become Your Own Boss in 12 months; A Month-by-Month Guide to a Business That Works. (Adams Media 2010)