For many of us it’s the end of the financial year. It’s the time where we have to face up to the truth of how our business has fared financially. What that bottom line tells us. For some of us this is not a truth we want to face. For others it’s good but we can do better. I don’t think there are many small business owners who are ever completely satisfied with their financial achievements.
Having to face up to the state of our finances can be counter-intuitive as we often plan and set our strategies, goals and actions at the beginning of the calendar year. Something I’ve been talking about in previous posts on the health of your business and getting your business back on track.
No matter which way your business finances turn out, and I do hope that the numbers god has been kind to you, there are some practices you can put in place to reduce that end of year shock. You can:
- create a budget – groans and rolled eyes aside, a budget doesn’t have to be some massive spreadsheet with every single item and dollar accounted for. It does have to be reasonably detailed. One line for revenue and one line for expenses is not detailed enough. It should have all the major areas of revenue and expenses in it. If you are not sure where to start, use your detailed Profit & Loss statement to help you. If you don’t do your own accounts ask your accountant to print it off for you. They may even help you.
- review your Profit & Loss statement regularly – monthly at a minimum. Check it against your budget for any variances, particularly higher expenses and lower revenue. Investigate why there are variances, perhaps there was an unexpected expense, your revenue is more seasonal than expected, slow paying customers, higher cost of goods, you budgeted for the item in a different month. Knowing is better than not knowing. Then decide on the action you are going to take and, wait for it, take it. Sounds simple I know, however it can be all too easy to put it aside and forget all about it. Until the next month.
- develop a pricing spreadsheet – many small businesses, myself included, have different pricing structures and strategies for different products and services. We sometimes have different strategies for different client types. It’s important, actually vital, to make sure that your pricing strategy covers the costs of the business at the very minimum. This is your breakeven point. To put it simply this is where revenue and costs are balanced or zero. It also helps when you are developing a quote or a proposal for a potential client. You can feel reasonably confident that you have covered all aspects of the job, particularly if it’s a fixed price proposal.
That’s three of the things you can do to kick off the new financial year – no excuses.
One final tip which I heard a while back that really stuck with me and I use it when I talk with my clients about their financial goals and actions:
As a small business owner you must decide whether you are a ‘for profit’ business or
a ‘not for profit’ business (charity). If you decide you are ‘for profit’ then you must
be and stay on top of your finances.
To a very happy financial 2011 year!
Photo Credit: 
photo credit: Philippe Put
