The Fall Financial Review For Owners Who Hate Numbers

The Fall Financial Review For Owners Who Hate Numbers

Fall Is For Reflection

It’s November and I consider November the very end of the year. You could continue building goals and try and distract yourself for another 90 days. Those who know me know I like to work in those 90-day Madwoman Cycles. But I think at this point of the year, as everyone else is slowing down and starting to nestle into Autumn weather, it’s the perfect time for you to reflect on where you’ve been and prepare for what’s to come.

The first is to start reviewing financial statements.

There are a couple of things that I like to do in November to help set my New Year up right. The first is to start reviewing financial statements. Even if you hate numbers, this exercise is worthwhile. Now of course everyone knows there is a dual-purpose here because if you start preparing financial statements in November then tax season is so much easier. It is an awful feeling to be sitting in the middle of winter 2019 combing through all of 2018 expenses. So I try to jump start.

The Three Step Financial Review

This looks like me going through bookkeeping software, updating expenses, filing receipts and taking a hard look at my Profit and Loss statement (P&L). If you hate numbers, maybe you haven’t been tracking all this time. But that’s okay, download your bank statements, open your Paypal dashboard and grab a highlighter. All you need to know is what you spent on what, and where the money came from.  And that’s the bones of a P&L. And when you’re looking at your P&L you should be looking for three key things. There’s of course tons you can glean from your company’s financial statements, but if you’re a newb (hate numbers) to business money management, I think these three will be a good place to start and make good use of this exercise.

1. Your Revenue Month-to-Month

Now this is important because if you have a seasonal business or service-based business this gives you a sense of the ebb and flow that you can expect in a full 12 month cycle. Now I like to look at what are my months that were extremely low revenue, and what were my months that really hit it out of the park. And that helps me see and start to plan for how I want to work next year. I can think through when I want to start marketing for certain things if I know those low months are coming. I also know where I might want to insert a break (what’s up vacation?) because I know revenue is going to be high for a particular month. It’s a great way to start planning out my next year around my business revenue.  Now even if you hate numbers, you should know that revenue is just a fancy way of saying “sales” or “money coming in”.

Gross is what you make, but net is all about what you keep

2. Annual Gross Versus Net

When we talk about sales (revenue) there are two kinds. So gross is looking at what did I bring in? Net is then after expenses, what was I left with? Depending on which expenses we take out, that’s what we call owner’s equity or margin. And you can do a lot with margin. This is cash you didn’t use. And knowing those numbers for a full year of your business, you can plan for how you might want to use that “extra” going forward.

Is it for investing back into operations? Like hiring more contractors? A business coach, more marketing? Maybe joining a networking group or attending a conference? Is it for setting up a business savings or investment account? Is it for donating to charity?

If you’re solo, the other thing that looking at gross versus net does is help you think about owner’s compensation. Gross is what you make, but net is all about what you (your business that is) keeps. Maybe I can afford to 1) set a consistent salary and/or 2) increase my compensation next year. I can look at what I paid myself last year, how much surplus I made, and then decide how much of that is going back into owner’s compensation or salary. This does mean I’m expecting my new year to be just as good if not better than last year, but I think it’s a fun exercise and helps me reset salary expectations for 2019.  You might hate numbers, but I know you like getting paid, so this step is a fun one.

3. Expense Lines Month-to-Month

This is when I start to notice those ebb and flows in expenses, just as I did with revenue. Do I need to make those same expenditures going into the new year? Can I run leaner in some of those months? Should I just redirect some of those investments to be more effective given what I know about my sales patterns?

Again super easy to digest your Profit and Loss statement, (or your spreadsheet, or your pile of bank statements) to track your business expenses for the year. Just look for those three things and you’ll be ahead of the curve.

Hope that helps you! To recap: Check Revenue month to month, check equity for the whole year, and check expenditures. All this helps to see how you might want to redirect spending your money (and your time) for the new year. And just by pulling the data in the first place, your tax season self (and your CPA) will thank you.

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