Basic Business Health Check
Last week I said about giving your business a health check. If you have an accountant and are getting monthly or quarterly management information from them then this will let you know how your business is performing, but:
- You need to read the reports that you are sent
- You need to understand the reports that you are sent
- You need the reports to contain the information that you want, not what someone else thinks that you need.
But if you don’t have reports to hand, what can you do? Producing monthly or quarterly management reports on how the business is doing isn’t feasible for a lot of small business as it could be a cost that you just can’t afford right now. So, what can you do instead?
As always I am going to tell you to keep your accounting records up to date. And then get tracking the following:
- Monthly sales – if you keep a record of the sales each month you can see if they are going up or down, if there are any trends or concerns.
- Sense checking pricing – are the prices you charge still right? If you provide a service and are fully booked could you put up your prices? If you sell a product and the material costs have increased have you considered passing this onto your customers.
- Sense checking general costs – look at what goes out and where – is it right? Is anything missing? Is anything too big?
- Cash – “Cash is king”, “profit is vanity, cash is sanity” .. these are both well known sayings in the business world for good reason, without cash business die. So track what the cash position is at the end of each month as a minimum. If you want to take it further, start looking at opening cash + income – outgoings = closing cash and looking at what those outgoings are. There will be months where you have a big spend, it happens but in general you want to be budgeting for these so that they don’t have a detrimental impact on your cash position.
Hope that helps!