In the first part of the Series: Practical Financial Styles In Small Business, we discussed the simplified financial styles of small business owners. In the second part of the Series, we talked about the Practical Financial Setup For Success that can sprout your style to work for you, instead of against you.
The third part of the Series is this article, which suggests the Quick and Easy setup of a Practical Financial Dashboard. It is a Dashboard that will aid your daily or weekly tactics, and should be ever-changing, like steering a wheel in the moving car, to stay in a lane to your goal.
If you are leading 4:0 in the first inning of your game, your strategy will be completely different than when you lost 4 goals by the half-time, wouldn’t it? But you need to see that dashboard daily to be able to have a smooth cash flow ride.
Looking at the financial statements once a year, when your Accountant prepared the year-end documents, is too little, too late. Although you have a general sense where you are with your business, the results are better controllable when analyzed frequently. For this to work, it needs to be quick and easy.
So how can you keep an eye on your dashboard, but not spend on it most of your day?
First, you need to know what to track on the fly to have a good idea how your business is doing. You have several financial reports in your bookkeeping/accounting software. If you don’t, get a software that is up-to-date. These packages are not expensive, and it’s well worth it. They don’t require complicated skills once setup properly by your accountant, to keep up with the daily entries. You will need to look at a combination of financial statements and other key indicators.
In the most popular accounting software: QuickBooks, the quick and easy Financial Dashboard is a Company Snapshot screen.
It should be customized, to what are your company important business indicators to see.
The key practical weekly business indicators may be:
- Am I making profit this week?
- How many sales I need to cover my fixed costs?
- Is my pricing working for me?
- Who are my best customers?
- What are my best selling products/services?
- Is there enough cash in the bank to pay current bills?
- Am I up-to-date with all tax instalments requirements?
- What is the status of my receivables?
- Do I have enough inventory for forecasted sales?
These are just current, practical, financial indicators. You may have your own set of indicators, set out by your Accountant or Advisor, much better than the one I mentioned. The main thing here is to have them, in a manageable, easy to reach set. Google the PKIs that professional business valuators are using. These would be more important when selling your business or trying to get funding.
Any business indicators need to be fact-based, so keeping up with the data entry as you go is crucial to avoid misleading yourself.
To recap the importing points here:
Financial styles differ, and a small business owner should use it to their advantage by tweaking financial setup to flourish rather than stumble.
Are you ready to sprout your financial style?
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