Monthly Financial Check-ins Every Business Owner Should Do
Running a business is often like a roller coaster ride. You experience the highs of success and the occasional lows that come with financial challenges. As a business owner, it’s crucial to stay on top of your finances to ensure smooth operations and continued growth. That’s why taking a scrum master certification can be such a great help.
Once becoming a Scum master, as a business owner, you need to rock your monthly financial check-ins. What are those check-ins? Find out the answers here.
Income Statement Review
This document provides a snapshot of your company’s revenues, expenses, and net profit over a specific period. It allows you to assess how well you’re generating income and managing costs. So be sure to examine your total revenue for the month. Compare it to previous months or the same period last year to spot any trends – are sales increasing or declining?
Identifying patterns can help you understand what factors may be influencing your business’s performance. Next, dive into the expense section of your income statement. Analyze each category individually: cost of goods sold, operating expenses, salaries, marketing costs, etc. Look for any unexpected increases or decreases that need further investigation.
Cash Flow Analysis
A cash flow analysis basically lets you know and track the movement of money into and out of your company over a specific period. This analysis helps you identify patterns, trends, and potential red flags that may impact your business’s cash position. To conduct a cash flow analysis, start by reviewing your bank statements and accounting records to determine the actual inflows and outflows during the given period. Categorize these transactions into operating activities (e.g., sales revenue, expenses), investing activities (e.g., purchase or sale of assets), and financing activities (e.g., loans, equity investments). Next, calculate key metrics such as net cash flow from operations, free cash flow, and working capital ratio. These indicators provide insights into how efficiently you’re generating cash from daily operations or whether external financing is required.
Accounts Receivable Aging
Next, accounts receivable aging provides valuable insights into the company’s outstanding invoices and helps identify any potential cash flow issues. By analyzing this type of report, business owners can gain a clear understanding of how long it takes for customers to pay their bills. In this report, customer balances are categorized based on the number of days past due. Typically, these categories include current (0-30 days), 31-60 days past due, and 61-90 days past due. This also includes over 90 days past due. Each category represents a different level of risk for collecting payment. Reviewing the accounts receivable aging report regularly makes it possible for business owners to take proactive measures to address any overdue payments or collections issues promptly. This might involve sending reminders to customers with outstanding balances or implementing stricter credit policies for late-paying clients.
Expense Audit
Last but not least, let’s talk about auditing. Conducting an expense audit allows you to identify any areas where you may be overspending or wasting money. It provides an opportunity to make strategic decisions that can positively impact your bottom line. Start by gathering all your financial records, such as receipts and invoices, for the past month. Categorize them into different expense categories like utilities, marketing, office supplies, and so on. This will help give you a clear picture of where your money is going. Once categorized, go through each category one by one and assess if there are any unnecessary or excessive expenses. Look for opportunities to cut costs without compromising the quality of products or services provided. Remember that an expense audit isn’t just about cutting costs; it’s also about identifying areas where investing more money might generate higher returns in the long run.
The Bottom Line
Conducting monthly financial check-ins is crucial for every business owner. It allows you to assess the health of your company’s finances and make informed decisions moving forward. By reviewing your income statement, analyzing cash flow, monitoring accounts receivable aging, and auditing expenses, you can stay on top of your financial situation.…
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