Getting Real with Your Business Finances

Quick question: when's the last time you actually enjoyed checking your financial statements?

If you just spit out your coffee or rolled your eyes, you're not alone 😆

Let's face it, finances can be really dry, but they're as crucial for keeping your business going and it's actually very empowering to be in control of them.

There are many things out of your control in your business.  You can't control the economy, you can't control the weather and gawd forbid, you can't control a pandemic.  Instead of focusing on the things you can't control (too stressful), I would suggest focusing on what is within your control.  Your numbers is one of those things. 

Here are a few things for you to ask yourself:

1. How regularly are you giving your financial statements a once-over?

   • Is it more "whenever I remember" or like clockwork every month?

2. Do you know your most profitable products or services at a glance?

   • Which parts of your business are making it rain, and which are just causing a drizzle?

3. What’s your game plan for budgeting?

   • Are you the type to wing it, or do you have a plan?

4. How are you handling your debt?

   • How are you tackling what you owe to keep your business stable?

5. When's payday for the boss (yeah, that's you)?

   • Are you remembering to reward yourself for all that hustle?

If you're reading this and feeling nauseous, let me suggest a few things. 

1.  Having up-to-date monthly financial statements is REALLY important.  How can you plan if you don't know what's going out and what's coming in?  How can you plan if you don't know your profit margin?  This is not a once a year thing....this is a monthly thing or if you're not doing it al all....even a quarterly thing.  This is where a bookkeeper comes in really handy- wink, wink!

2. Going through your expenses a couple times per year is super VALUABLE for identifying subscriptions, fees, memberships and contracts that might not be getting you the ROI they once did. This "lean budget" approach focuses on maximizing value and efficiency, allowing you to direct funds to areas that will keep your business afloat and thriving. By eliminating unnecessary costs, you free up cash that can be used to pay down debt, invest back into core business operations, or save for future emergencies.

3. There are 2 popular methods for paying off debt.  The first is by paying off the ones with the highest interest rates first. This method, known as the Avalanche Method, reduces the amount of interest you pay over time, which can significantly lower your overall debt burden. If however, you are looking for a few quick wins or struggle with financial discipline, consider the Snowball Method.  I highly suggest you read up on these methods further if you have debt in your business!

3. Reach out to your vendors and creditors to negotiate better terms, such as extended payment periods or lower interest rates. Many businesses have been affected by the pandemic, and suppliers are often willing to work with loyal customers to maintain a good working relationship. This can help ease cash flow pressure and give you more breathing room in your budget.  You can even do this with credit card companies.  I would renegotiate rates as often as I could 😉

4. If your business holds inventory, optimize it. Excess inventory ties up cash and space, while too little can lead to missed sales. Use inventory management techniques like just-in-time (JIT) to reduce holding costs and free up cash, ensuring you only have as much inventory as needed based on demand forecasts.  You can also hire companies to help you manage your inventory, which is something I did.

5.Consider a profit-first approach by setting a specific percentage of your revenue as your personal wage. This strategy ensures a clear distinction between personal and business finances, and emphasizes the value of your contributions to your business.  You NEED to pay yourself first 😘