Did you have a profitable 1st quarter of the 2017 year or do you not have a clue?
If you had a profit, well done! Have you set you targets for the 2nd quarter of the year?
If you don’t have a clue, let’s take a look at what you might be able to do to find out.
Chances are that you don’t have accounting software and that’s cool for now. I have a really simple process that you can follow until you feel ready to start using computerised accounting software. I promise you, as you business grows, you will outgrow the manual system that I am going to show you. I actually think it is great for small businesses to embrace the basics first and really start to feel comfortable with this area of your business.
So let’s get started.
STEP 1: SORT & SUMMARISE RECEIPTS
- Purchase a couple of A4 lever arch folders and monthly dividers (see my filing blog https://thebizbuddy.com/how-to-set-up-an-effective-filing-system-for-your-business/)
- File all of your business receipts in date order behind the appropriate month tab
- On a piece of paper or excel spreadsheet summarise the receipts into categories (so you know how much you are spending on each category)
- On another piece of paper summarise your income
STEP 2: PREPARE & REVIEW YOUR PROFIT & LOSS STATEMENT
- Transfer the income and expense figures to The Biz Buddy Profit & Loss Template
- Add in some of the the extra things I have suggested like home office expenses and motor vehicles expenses
- Review the blank boxes on the Profit & Loss Statement – did you spend money in these categories? If you have, locate receipts, file and add the figure in
- Review all boxes on your completed Profit & Loss to see if it now looks accurate
- Calculate your profit/(loss) for the month (I hope it’s a profit!)
STEP 3: REFLECT
- Are you happy?
- Did you achieve your budget?
- What do you need to change this month to make next month’s profit even better?
STEP 4: TAX
- Do you have anything outstanding with the ATO? If so, attend to lodgement or payment or contact ATO for assistance or payment arrangement
- Have you put away tax to cover this month’s profit? If you are not sure how to do this read my blog ….. Or ask your accountant
STEP 5: PLANNING FOR NEXT MONTH
- What is your budget?
- What are your goals for the month
- Do you have a plan on how you are going to achieve your budget?
- What are you going to focus on during the month? Increasing Income? Decreasing Expenses? More Balance?
- What are you going to let go of this month?
- What support do you need this month to help you achieve your budget & goals?
- How are you going to reward yourself at the end of the month? A massage, facial, new handbag?
STEP 6: REPEAT EACH MONTH
Once you have a system and process and follow it each month, it will soon become second nature to you and the benefits that will flow onto you and your business will be invaluable.
- You will actually know how much you are earning and how much you are spending
- You will be able to make adjustments within a few days of the month if need me to ensure you next months sales are increased or expenses decreased if you profit was less than expected
- You will be able to determine a return on your investment of time eg. if you have worked x amount of hours that month and earned net profit of y, your hourly rate will be y divided by x. Is this adequate? Do you need to increase your prices?
- Ensure you are adequately putting away money for tax so you don’t get a nasty tax bill when you do meet with your accountant or lodge your tax return
You may think that you only have a small business and all of this stuff can wait until you get bigger, but realistically it is this sort of information that will help you get bigger and better quicker. Could you image driving a car blindfolded? You wouldn’t know where you have been, how you got there and where you are going? This is the same with your business’s finances.
Best of luck tracking where you have been for the past 90 days, reflecting on your results and planning where you are going for the next 90 days.[yikes-mailchimp form=”3″ submit=”DOWNLOAD YOUR FREE MONTHLY CHECKLIST HERE”]