Alright, 7 weeks left in 2021. We spoke about the first step in your year-end business checklist last week. So, if you missed that…stop this real fast, go back and listen and then come back to today. It’s that important and I don’t want you to miss any steps! What do we need to do in our business, to prepare for 2022? Good morning everyone, Thomas Joyner with Business on Purpose here.
Last week we spoke about Tweaking and Revisiting the Vision for your business and communicating that with your team through a year-end letter. It’s simple, yet unbelievably powerful. Today I want to start by diving in on your end-of-year financial checklist.
A quick story for you…a few weeks ago I was working with a local business and we jumped back into their financial dashboard, we call it the level two dashboard, to just look at a few things. They had subdivided their bank accounts into 5 separate accounts. Profit, operating expenses, owner’s compensation, taxes, and an income account that everything gets deposited into. Simple, yet effective.
We spent some time looking back over the highs and lows of the year and the numbers told us a few things. First, having updated books isn’t all it’s cracked up to be. Necessary, yes, but doesn’t give you an accurate picture of your business always.
“I’m looking at our P&L and it’s telling us we made “x” dollars so far this year. Why isn’t that in our bank accounts?”
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Exactly why we do this. Sure enough, all of their cash bank accounts were lower than anticipated with exception of 1. It allowed us to ask questions…
What do your receivables look like? Do we have any big accounts that have yet to pay that will really move the needle? How do we need our team spending their time to make sure we collect on those receivables? Do we need to forego overtime for a period until we can get back to a better cash position? Do we hold off on new equipment or buying material in bulk until we can collect on overdue invoices?
All of this helps give you, the business owner, a better idea of what you need to run your business off of. Imagine if we had just looked at the P&L? Tons of billing, expenses look normal, revenue is up, but everything is not necessarily attached to cash in the business. So you go about your business as usual, spending away and digging yourself a hole.
That’s why we use our Level Two Dashboard. It tells you what you can run your business off of today! And allows you to make informed decisions.
And the beautiful thing about this conversation. We saw that two checks needed to be picked up asap…AND the business owner could actually give himself a small raise and his guys a small raise in the coming year.
That’s why we track our cash position weekly!
So, if you haven’t already. Subdivide your bank accounts. If you haven’t already, go back and listen to our Multiple bank accounts podcast or set up a meeting with us to go through it. It’s magic!
Then, begin tracking your cash position in each account weekly or biweekly. Make sure you’re including payables and receivables so you have an accurate representation of all that you need to know.
If you have all of that setup, look back over the course of your year. What information can be taken from your cash swings? Are there months that are lower, that you need to cut costs? Can you afford to give yourself a raise? Do you have the money for new hires? What is your ACTUAL net margin??? That’s a big one. Not the one you think you have on a P&L.
All of this gives you the information to look at next year and put together a simple budget. Nothing too fancy, but project out your work, your expenses, your payroll and do it on purpose instead of just running your business hoping for the best.
It puts you back in charge and helps you make informed decisions going into 2022.
So do it right now! Look back over your level two dashboard and build a simple budget for next year. Do you need to change any percentages, allocate for costs anywhere? Give anyone a raise or change anything up?
Now is the time to make those decisions!
Alright, that’s all for today. Remember, step one was tweak and revisit your vision and writing a letter to your team. Today was all about financial readiness with subdivided bank accounts, a dashboard to track them, and a simple budget to capitalize on the information for next year.
Now go and do it right now!
Have a great day.
Thomas Joyner is a business coach in the Lowcountry of South Carolina specializing in liberating business owners from chaos. He is a weekly contributor to The Business on Purpose podcast and can be found at mybusinessonpurpose.com