Unless you can hire an accountant and maybe a business coach, you have to maintain financial records and look at profit/loss statements to take care of your business’ financial health. It's your responsibility.
If you're not sure how to start managing your business finances on your own or how to move forward with the information, here are some effective tips to help you get on the right track.
1. Get Geeky
Creating a simple spreadsheet is key for checking in on the lifeblood of your business. Eric Nisall of Accountlancer explains that "the spreadsheet can be utilized to compare expenses month-over-month and see what may be anomalies in spending or negative trends that need to be addressed." You can get a clearer picture and make decisions moving forward based on the numbers.
When looking over business expenses, CPA and FinCon Founder Phillip Taylor emphasizes reviewing both fixed and variable expenses and knowing the difference between the two. He explains that fixed expenses are monthly costs like overhead. Variable expenses can go up and down based on sales. He adds, “Knowing this will help you determine your break even number.”
2. Cut the Cord
After looking over the spreadsheet you made and getting a lay of the land financially, Jessica Moorhouse of the Mo’ Money podcast believes that if things are tight and something has to go, temporarily hold off on a service you can handle on your own for now. “It's a matter of trading time for money, but it may be worth the sacrifice as you build your business and can afford to outsource such tasks later on.”
While there are expenses every business has to pay, make sure you are getting the most out of the ones you currently have. While some services might produce desired results right away, other investments might require a little more time to see results. So you’ll have to weigh your options carefully.
Business owners might want to wait it out when it comes to spending on certain aspects of their business. For example, MailChimp is an email marketing platform that allows you to collect up to 2,000 subscribers for free. Once you surpass that mark and your business is making more money, you can upgrade to the paid model. You might not see an instant return on investment but you can monitor and see if it turns into a justifiable expense.
If you are still having trouble deciding which expenses to keep and what to cut, Motivational Money Coach Jen Hemphill suggests asking yourself a few questions as you analyze your business expenses, “Are you using it? Is it providing an ROI? If you aren't using it or the ROI is not anything to brag about, cut the expense out!”
3. See What Others are Doing
Sometimes you can get ideas by peeking at other websites to see how they are set up. For Peter Anderson, graphic designer and website owner at LogoForWebsites.com and BibleMoneyMatters.com, setting up a streamlined process from the start is key. Anderson says, “If you don't do something like that, it can be chaos, as you're trying to deal with multiple buyers and projects without any real aim.”
Anderson made the process simple by setting up a "buy now" page. People could easily select a logo package and then promptly pay for it right away using PayPal (PYPL). He went on to say that once the payment went through, a questionnaire was sent to record pertinent information for the job to be completed.
This helped him get an idea of what the person wanted in the logo without having to discuss the specific details on a call. After having the payment and questionnaire, Anderson would design an initial draft for the customer’s review. The customer would then submit their feedback and they would go from there. You might want to put a limit on how many times you go back and forth to get the final draft completed or consider charging more if it takes longer to tweak a final draft.
Anderson adds, “When running a small freelance business like that, it's important to have streamlined processes in place and know what your expectations are not only for yourself but for the customer. Set guidelines and follow them. Or else, it can become a mess.”
4. Sometimes We Think We Have to Come up With Something New, but We Don't
Another strategy for boosting business is to work smarter. If you’re wracking your brain trying to think of something additional to add to your current income streams, you might not even need to do create something new. Consider spreading the content you currently create in different places. On the website TheInnerChangeMaker.com, Jay Wong often maximizes his time recording interviews.
His video recording with John Lee Dumas was also used as a podcast episode. This same interview can be heard on Jay’s podcast and the video can be found on YouTube. This is a smart way to get the most out of the content you produce in one shot while expanding the audience you reach.
You don't have to make additional content, you just get the most out of what you make and use it in multiple places. You can also repurpose this type of content in other ways. Turn information from them into lead magnets, make free e-books, checklists, etc. to entice more people to join your email list. The possibilities are endless.
5. Pay Others to Show You the Way
If you feel like you can't quite hang with the cool kids when it comes to ramping up your revenue or looking at online income reports doesn’t automatically make you connect the dots as to what action steps would make sense for you, take advice from the title of the new song by the Chainsmokers and Coldplay called “I want something just like this”. Look around at different business models. Find one that fits what you want to follow and try to take the same steps that business owner did to be more successful.
If you want to open an online store, website owner Steve Chou of MyWifeQuitHerJob.com teaches people how to run a successful eCommerce store as well as other online businesses based on his own experience and success in doing so. His blog posts also detail his experiences in trying new ways to sell his products and services including the use of webinars, Facebook (FB) ads, Adwords campaigns, email sequences and even a successful online conference.
6. Packages Can Cut Back on How Often You Invoice
Some people find it easier to make packages that requirement a minimum amount of time to work together. This ensures you'll have work for a certain amount of time and also cuts back on how often you have to send an invoice. Depending on the type of business you have, think about having people pay in advance or at least half of the total upfront. One way to combat this is to come up with packages that ensure that you'll have steady work. It can reduce the amount of invoice you send and can stabilize your cash flow. For example, if you're a business coach, you might want to set up packages for 3 months, 6 months or a year.
The Bottom Line
It's essential to take care of financial details in your business. Looking at a spreadsheet that shows your revenue along with expenses and other pertinent information will help you monitor and adjust along the way. Also, use the tips above to improve trouble spots and make needed improvements to grow your business.
6 Tips to Stay on Track Financially was originally published on Due by Karen Cordaway.