We take care of things that I value. I take my car to the mechanic to keep it running smoothly. I have my furnace serviced every other year to insure heat during the winter. I exercise and watch what I eat to keep to improve my performance and to enjoy life. I also perform regular checkups on my business financial health. It is not just about performance, it’s about risk.
We are all extremely busy. Without regular check-ups on financial health, it is easy to lose control and let problems grow.
Key areas to watch…
- Financial information needs to be timely, accurate and useable.
- Cashflow is the life blood of the business and necessary to stay in business.
- Our management system and habits will keep the business healthy.
Here’s a rundown of how I create and maintain a regular health check-up plan for my small business.
Weekly
- Weekly I monitor collections and staff client time. We are a service business so where the time goes is critical. I match actual to my expectations and make sure I understand what happened if we didn’t hit our targets. If this is off, we will not stay financial healthy.
- Weekly I review what our customers owe us. If a customer is not paying us – why? Are they having financial difficulties? Sometimes, I need to write a note to motivate a client to pay us.
- Weekly I monitor our bank balance. I have set a minimum that I expect. If we don’t hit that, I need to dig deeper into the issue.
- Weekly monitor the online bank activity, making sure I understand where the money is going and coming.
Monthly
- Review our Balance Sheet and Profit and Loss right after I finish the billing for the month, usually the first business day of the month. I check the Balance Sheet first to make sure the account balances are reasonable.
- Compare this YTD Profit & Loss to last year’s numbers, looking for changes. Increased wages, increased software costs, etc. Is our business overhead flexible and allows a profit?
Once a year
- Review my compensation to see if it greater than the risk I am taking.
- Review our target market to make sure that it is growing and strong.
- Review our services, marketing, and pricing to verify that we are attracting our ideal client.
- Review gross margin by customer. Make sure we are generating a profit on each one. Also be aware if one customer accounts for more than 10% of our gross margin. If something happened to that customer, it would have an impact on us.
- Look at our staff and our systems so that we can enhance the business value.
- Review my emergency succession plan is in place to hold the business value in case I can’t be here.
The end of the year is a great time to evaluate where you are at. Identify the areas you can improve and then act.
If you would like to improve your financial health, we can meet to review your current situation and create an action plan. Call to set up a business health checkup.
Mary Guldan-Lindstrom, CPA
