A healthy business is a wealthy business! Managing the financial aspects of your business should be a top priority due to their impact on your overall success. With so many areas to assess, we've simplified the process by breaking them down into a few questions you can ask yourself about your business.
Here are four checkpoints to review your business's financial wellness.
1. Am I forecasting my business's future cash flows?
It's important that you have a clear view of what lies ahead for you and your business. By predicting what your income and expenses may look like in the coming months, you're able to stay ahead of any potential challenges. You're not just preparing for them, but actively preventing them. A sudden drop in sales due to market changes can catch you off guard if you're not looking ahead to your financial stability. Another example to consider is if you're thinking about investing in new equipment, is your future income sufficient enough? This practice is a must for making informed choices about budgeting, investments and managing expenses. With this insight, you're able to make better decisions with confidence.
2. Do I track all my business expenses?
Don't let anything slip through the cracks. Monitoring every expense, no matter how small, is not only about staying organized ‒ it's about gaining a comprehensive understanding of your business's financial health. By logging every transaction, you'll have clarity on where your money is going while being able to identify areas that you can save money in. Additionally, an often overlooked tip when tracking expenses is to categorize them by both the type of expense (rent, supplies or utility) and by time period (date of expense) making it easier for you to spot seasonal patterns or periodic spikes in costs. One step to help make this process even easier is to open a business bank account to help make sure you have separated your personal and business finances.
3. Do I review and adjust our pricing?
If the industry that you're in seems like it's always going up and down, that means it probably is! With so many fluctuations in consumer demand, market trends and seasonal changes, it only makes sense for you to do some research and understand when you should change your pricing. At the minimum, small business owners like yourself should review their pricing annually. However, quarterly checks are even more beneficial if you can make the time for it. It can't hurt to regularly assess your prices to ensure that your business stays competitive in the market. Keep this in mind, just because your competitors greatly lower their prices doesn't mean you should follow suit. Instead, focus on the value you offer and ensure that your pricing factors in your costs and reflects the quality and uniqueness of your business's offerings.
4. Am I paying our bills on time?
Out of all the points mentioned here, this one is particularly crucial to acknowledge. If you're not paying on time, late fees can pile up as well as hurt your business's credibility. Whenever your payments are late, it represents your reliability in a negative light with suppliers or creditors. Paying your bills on time shows you're dependable, which can help you score better credit terms and lead to more favorable deals down the road. Prioritize your bills so they don't become a liability in the future!
Financial stability has many components to it, but answering these questions for your businesses can help you see where it's standing in terms of financial health. You may uncover areas where your business is underperforming or find new opportunities to grow. By going through these checkpoints, you may be surprised to learn a thing or two about your business.
Check out our blog on setting SMART financial goals to create a successful plan for the rest of the year.
Author: Gary Wong
How often do you review your business's financial health?
Feel free to let us know in the comments below!
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About Stingray Advisory Group LLC: Stingray Advisory Group LLC is based in Grand Rapids,
Michigan, and is a proud member of People First Economy and the West Michigan Hispanic Chamber of Commerce. We help businesses thrive. By improving our client's sales over 60%, reducing their expenses and boosting their engagement by 40% or more, we enable our clients to refocus on what they love.
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