How to get better with your business finances
Money is always a hot topic and a very controversial one - but I'm not here to add fuel to the fire OR set you any sales goals for 2023.
Instead, I'm here to get you to have a money minute, think about what you want financially from the business, and give you some pointers to help you on your way to making better choices with your business finances. I speak to so many business owners who don't track their money in any way or couldn't tell me how much money they made this month or last or what their expenses are. If you can't tell me that either, you definitely want to continue reading!
It's so crucial in business to understand your money and how it's flowing and it will ebb and flow - trust me! But ebbing and flowing is normal, you can use the data to find a pattern and understand the seasons of your business. Once you understand how it ebbs and flows you'll be able to understand how to prepare for a dip and how to utilise an abundance when you have it.
The key is preparing, checking in regularly, and being proactive. Managing Money and Cashflow
Let's start with the jargon busting:
Cashflow: The movement of money through the business
Disclaimer: This information is designed to be used as general advice and is not personal to your business and should not be interpreted in that way. All information shared is based on my experience as a business owner and from past education - I am not a registered accountant and do not claim to be.
Where to start
I'm not about to blow your mind with this one - just track it!
The best place to start is just by tracking what's coming in and out of the business on a simple spreadsheet. If you haven't gotten my free one yet just hit reply and ask for it and I'll ping you over the link 😊
Once a month just take 30 minutes to update your spreadsheet or have your bookkeeper or accountant send you an overview for the month/quarter. Then take a moment to actually look at the data - don't just fill it in and ignore it 🙈.
Where are your sales coming from? How much are you making? Have you had any peak or unusually slow periods, can you pinpoint why?
If you have done your capacity planning you've likely mapped out some financial targets for 2023, have a look at what happened in 2022, what do you need to change in 2023 if you use 2022 as a guide?
Reviewing your Expenses
Once you've looked at the money in, and done a forecast for 2023 I want you to take a moment to look at your expenses. In 2022 was you running in a profit/loss or just breaking even? (running at a loss isn't always a bad thing if you're in a period of growth or startup).
How do you want that to compare in 2023?
I recommend at least twice a year having a cull of your expenses. Look at any regular outgoings, do you know what they all are? Are you utilising them? Can you get rid of any? The quickest way to increase your bottom line is by tightening your expenses.
Once you've done that it's time to consider negotiating any contracts you have - especially if you're product based, can you secure a better deal with your supplier? Shop around to see if there's anything better suited to you and your business goals for 2023!
Tips to manage the flow
As I mentioned, your business will ebb and flow, summer is particularly quiet for me and my peak times are Q4 and Q1 (the end and start of the year). Once you understand your flow you can plan for it.
For reference to the below, I follow the profit-first method by which I put a different % of all my earnings into pots and use what's left for expenses to ensure I'm always putting myself and my profit first. It also prevents me from overspending! If you want to learn more about the profit-first method you can purchase the profit-first book on Amazon
Here are my top 3 tips: 1. Don't pay yourself 'whatever's left' You need to have money set aside for your quiet periods, instead set yourself a reasonable salary and put the rest in a pot so you can still pay yourself in the quiet months
2. Don't over-invest or commit Now, there has to be an element of risk in business BUT don't get yourself into debt unnecessarily. I don't impulse buy for the business unless there's money in the investment pot to do so. This way I keep myself out of trouble financially. For long-term investments, I look at my projections based on past data and make a calculated risk. This is why tracking your money is key!! 3. Prepare yourself for Tax No one loves paying taxes, but we especially hate it when a big bill comes in and haven't put money aside for it, meaning we have to be reactive in order to find the money. Start being proactive in 2023 and put a % away each month just like if you were employed, then when it comes to paying your bill you have the money saved already. Bonus tip, after paying my tax, if there's money left, I leave a buffer and then pay myself the rest as a bonus, this year it paid for 2 holidays! Things to consider in your business: Take a money minute every single month, and keep on top! Be proactive in your financial planning, it could save your business! Get help if you need it to understand your money! Use your 2022 data to guide your 2023 planning. And that concludes my top tips on setting your business up for financial success in 2023!
If you'd like support building and implementing an effective strategy come and chat with me. I have several options available from one-off strategy sessions to more long-term support. Book a call here