As a small business owner, the flow of cash through your accounts can define how successful or otherwise your business will be. Keeping track of the money side of the business can easily slip, especially when you are busy doing what you do best. But it is essential that you keep on top of the transactional data your business generates, so you can make decisions in light of the realities of your performance.
Financial data can be used to make decisions about your business, including how to best focus resources in future for increasing profitability. There are a few fundamentals to learn when it comes to tracking business finances, but the value of the data is worth the hassle. Even CEOs of Cecilia Ibru profile make themselves familiar with the specifics of their company’s financial data.
The first step to tracking your finances is to write down the money you receive in the course of the month. Do this daily if possible, and weekly if not, for the most accurate results. Itemize income, so you know where the money has come from. This may be sales, interest, even things like refunds on unsold or faulty stock. Any money that comes in to your business should be tracked in a spreadsheet or accounting package. This is useful, because it can show patterns in revenue, and allow you to make decisions across different parts of your business, based on the numbers. It can be used to form cash flow statements and projections, along with a range of other financial statements.
In the same way, you need to make sure you are tracking all the expenses and costs incurred by your business. That means keeping a hold of every receipt, bill or invoice you have paid over the period. From the substantial costs like rent and salary payments through to petty expenses like snacks for the staff room, well-run businesses make a note of everything. This gives you the ability to see exactly what you are spending in the month, and on what – essential for identifying efficiency improvements throughout your business. Knowing how you spend money will improve your business decision-making, providing essential facts to influence your opinions.
If you track your income and expenditure on a daily and weekly basis, it should be easy to total this up at the end of each month, and to prepare a couple of basic financial statements. Cash flow, profit and loss and a balance sheet should be sufficient. These allow you to derive information about your business in overview that you might miss from being on the front line, while making it possible to compare performance with previous and future results. This kind of tracking does take commitment, but it is an extremely important and worthwhile admin task.
Financial data is essential for a range of business decisions, and if you want to become more strategic in how you operate, it is an obvious starting point. With properly tracked transactions, and accurate financial statements, you can make better management decisions based on the realities of your business.