1-minute read – Consider this: just as you prioritize annual checkups for your health and routine inspections for your car, it’s crucial to give your business financials the same level of attention. Regularly peeking under the financial hood can save your company from unforeseen issues down the road.
When Did You Last Review Your Business Finances?
Far beyond the account balance check at month-end, various critical fiscal accounting areas demand your focus and attention. Here are my suggestions for factors that a fiscally responsible business owner should review at least quarterly:
- Cash Reserves. Many businesses have some months that are better than others. Are you purposefully putting aside cash reserves for slower months, or a downturn in the market? A good rule of thumb is to set aside cash reserves equivalent to two months of overhead. If your balance sheet surpasses this, consider placing surplus funds in a money market account for liquidity with a touch of interest.
- Overhead Analysis. Do you know what your actual monthly overhead is? Pull a report of your expenses by month to see where your money is going. You may even find you are paying for a product, service, or subscription you no longer need or use.
- Inventory Management. For businesses with inventory, promptly address products lingering on shelves for more than six months. Take action to recover your investment by offering discounted pricing, or by highlighting the product in your marketing.
- Review Cost of Goods (COG). Staying on top of your Cost of Goods is imperative in hitting your desired profit margin targets.
- Pricing Assessment. Once you are on top of your overhead and COG, assess whether your pricing aligns with your profit margin goals. This is also a great time to evaluate your pricing against competitors to ensure you are competitive and not over or under the market.
Make it a Monthly Health Check
The best strategy is to look at your business finances monthly. That enables you to maintain constant awareness of your company’s financial well-being and avoid unpleasant surprises, such as being unable to meet payroll! In my Fall Planning blog post last month, I suggested that meeting with your accountant and reviewing your pricing strategies for 2024 were important parts of the planning process for 2024, why not wrap that into a full financial review and start 2024 off on a solid, fully-informed footing? Knowledge is power when it comes to your business finances.
Contact Flourish Today
Understanding your financial health can be confusing, and Flourish is here to help you navigate the numbers. Having an outside perspective is a valuable tool to identify and assist with practical strategies, saving you time, money, and headaches! So, why not grow your business with a Flourish?