Trying to figure out where we are so we can plan out where we’re going with the business. Up to now, I didn’t have a strategy and I didn’t know my percentages in finance. I didn’t know how things added up, if I was making money, or what to do to ensure the business was profitable. Today’s a new day. This is my line in the sand. Going forward, I want to run the business based on facts, knowing where we stand, and doing everything we can to ensure we run the business successfully for myself, my family, and my employees. Help!
Thoughts of the Day: Digging into the financial facts for the business is essential to having a well-run business. Assign someone who is good with data entry, and who you can trust, to input expenses. Use your newfound facts to create a budget and forecast expenses, to give you insight into the future.
There’s an old saying: the truth is in the numbers and the numbers don’t lie. That’s only partially true. The truth is in the numbers, so long as the numbers are accurate and up to date.
Putting all your data into an accounting system is essential
To help you better understand what’s going on with the business financially. If you don’t have an accounting system in place for both income and expenses, get one, and learn how to use it. Make sure the system you select is well tested, and easy to use to access data once items are entered. Get help setting up your chart of accounts to reflect revenue, cost of goods sold, and overhead expenses. Having regular reports that show gross profit and net income will lead to a better true financial picture.
Make sure that the people you select to help you are very good at accurately recording facts and numbers and proofing their work.
Choose people to enter expenses and invoices, the financial facts for business.
Set up a time to review their work every day, in the beginning, until you and they are confident that everything is correctly entered.
Don’t worry that someone else is looking at your revenue, expenses, and net income. That’s the least of your problems. Getting help to get an accurate set of accounting records is essential, and you can’t do that job alone and keep your eye focused on more important things such as running and growing the business.
Pick another person or team of people to review and prove the data entry. This goes under the category of, “respect what you inspect”. Avoid opportunities for fraud by making everyone aware that multiple sets of eyes are checking the books.
Now that you’re freed up from data entry and digging through stacks of bills to find out what someone charged you, you can focus your energy on reviewing the reports you’ll have available.
Get help setting up standard reports that you review weekly, monthly, quarterly.
Set up management reports that you review on a regular basis. Start with an audit trail report, that shows what categories of expenses are entered. Proof that daily or weekly, depending on volume, and make notes on items that need to be moved from one account into another. This is the foundation for the integrity of your accounting system.
Look at deposits and expenses weekly, to see if it’s all entered correctly by looking at your P&L (income and expenses). Use the Balance Sheet to check on bank accounts, accounts receivable, accounts payable, and loans. Dig into financial facts for the business.
Once things look accurate historically, it’s time to look to the future. Use averages and knowledge about what expenses are expected to build a budget for the next several months. Map out work that is expected to come in and create a revenue forecast. Put the two together to see how things add up, and if you’re making the kind of net income you need to pay off old bills, pay down loans, put money aside in reserves, and reward yourself as a shareholder.
