Tweak Your Biz » Growth » Facing up to financial facts: 3 steps to focus your priorities

Facing up to financial facts: 3 steps to focus your priorities



As a business woman I have a matter-of-fact approach to finance. If you want to make a profit you need to have more money coming in then going out. You need to make sure that you are not losing a significant amount of money on a large aspect of your business, and that you have a broad spread of customers to supply you with a regular income.

There are three core areas of your business which you need to focus on – cash flow, sales analysis and cost control. Focusing on these will allow the rest of your priorities to snap into focus.

Cash Flow

Devise a control mechanism for tracking your cash flow. Literally log all your costs daily for totally accurate results. Create a spreadsheet and list everything that goes on in the business – all financial incomings and outgoings, try also to include forward projections. Create other spreadsheets for sales forecasts, costings and bank balance. Link all the spreadsheets together so you immediately can tell what profit you are making and how much cash you have available to you at any time.

I used this spreadsheet method for my own company. It was so simple and effective, I have never had to learn another method.

Sales Analysis

Your sales analysis should include a breakdown of anticipated sales per month. This analysis should tie in with your cash flow so you can determine how much money is likely to come in over the next financial year.

The level of detail you include in your sales analysis depends on what type of product you are selling. Always make time to make sure that your figures are accurate otherwise the whole process will lose its significance.

Cost Control

Prepare a break down of costs for each product or service that your business provides. Customers want to know the price, and how can you negotiate with them if you do not know the unit price or what a cost-effective deal will be for both you and the customer?

Accurately costing is one of the hardest aspects of a business. Mistakes will be made along the way, but you can reduce these errors by making sure that you continuously review, assess and re-evaluate. There are many variables in business – reduce potential negative impact by trying to identify as many as possible.

Analysing costs does not complete your financial management. Planning to make a profit should always be your first priority – and then you make sure that you follow through. This is important to secure the overall business while also making sure that you make a profit and that you are not repeating past mistakes.



The Author:

Emma Wimhurst - The High-Energy Business Mentor, Successful Entrepreneur, Business Owner, Writer, Motivational Speaker, Business Mentor, Business Turnaround Expert http://www.emmawimhurst.co.uk/

Add Your Comment

  • http://www.btbtraining.com/blog Niall Devitt

    HI Emma, It consistently amazes me how sales forecasting for many is more an case of wishful thinking. It is important to face up to the facts and ensure accuracy even when figures are lightly to be poor, this is one of the first steps in improving results. Great reminders, thanks for sharing, Niall

  • http://blog.myprojecttracker.com Barney Austen

    Hi Emma. Seem like a solid 3 to me! I would suggest that the last is probably the most difficult for alot of people, particularly in the services/consultancy world. The pressure to do more for less to retain loyalty or to appease a strong-willed client can make it difficult to make a profit in a job. You have to know when to say enough is enough (nicely of course!).
    Regards
    Barney

  • http://www.seefincoaching.com/blog Elaine Rogers

    Hi Emma, planning and follow through are critical, I agree.
    I learned recently how to effectively cost my time, and it has opened my eyes to a few things. When providing a service, one is providing not just time, but accumulated expertise, experience, education, professional development and research among many other things, as well as the usual fixed and variable costs.
    Thanks for sharing.

  • http://www.seefincoaching.com/blog Elaine Rogers

    Hi Emma,
    Planning and follow-through are critical, even if the profits are small for start-ups for example.
    I learned recently how to effectively cost my services. We can omit important aspects when costing a service job, like the added expense and time taken for experience, expertise, education, qualifications, professional development and resources among others, as well as the usual fixed and variable costs.
    We need to value ourselves more, without overpricing (or underpricing as Barney notes).
    Thanks for sharing :)

  • http://www.ryanhanley.com/about Ryan Hanley

    Emma,

    Thanks for the article. One point about Sales-Analysis that I would like to make is too much time spent analyzing sales and not enough time selling can lead to downfall and hurt your first point Cash-Flow… Less time planning and more time doing is always good…

    Ryan H., http://www.RyanHanley.com

  • Piaras MacDonnell

    HI Emma, good post. May I suggest an additional area of focus, Gross Profit.
    Each week (month at a minimum) the business owner needs to look at each project and determine if it is still on track to make a profit.

    The sooner you can spot a loss making project the sooner you can act to turn it around or at least reduce the losses.