As a business owner it is easy to get caught up in the business. Customers are calling, emails seem to be endless, you are looking for the next sale, trying to get the last sale out the door, etc. The list is never ending. Throughout the days you pray the money is there when you need it. To reduce your stress and take control over your financial results I recommend these seven essential habits…
- Plan for success. Have a plan or a business model that can produce the financial results that you desire. By comparing your results to an industry model or last year, you can identify areas of improvement. Monthly compare it and see what assumptions are wrong or where you can tweak to improve the results. You may not be charging enough, your cost of goods sold is too high or your expenses may have gotten out of hand.
- Measure daily or weekly activities that drive your success. Based on the 80% / 20% rule – 20% of your activity creates 80% of your income. Measure the important activities. In my world it is how much time we spent providing service to our clients. For a restaurant it is monitoring the relationship between weekly sales, weekly food purchases and staff time. Good habits drive success.
- Use one bank account and one credit card for the daily business activity. Keep it simple. Fewer accounts to monitor and reconcile, less time it will take.
- Don’t mix personal expenses with business expenses. The books get messy. It takes more time to sort it out and provides little to no benefit. The IRS doesn’t like it as well.
- Keep current. Update and monitor your books timely. Attempting to catch up leads to errors and helps little issues grow into big issues.
- Save 30% of your net income for taxes. Reduce your stress and avoid the big surprise when you get your tax return. As the business profits increase, you will save enough to cover the additional taxes that will be due. Business owners are required to pay quarterly income tax estimates. We will do our very best to bring down your overall tax liability.
- Schedule time each week to review your finances. Do not procrastinate. Schedule an hour or two each week to review email, mail, checking account activity, cash in, accounts receivables, financial statements and activity for that week. Face your fears and just do it! Once a negative trend starts you will have time to correct before it puts your business under.
Your habits create consistent results. If your current habits aren’t creating the results you want, take a look at your daily, weekly and monthly habits and change them. If you are still challenged, sit down with a mentor, someone who is successful in your industry or your accountant to help you improve.
Mary Guldan-Lindstrom, CPA