Business owners can control their business finances by reviewing three numbers. First, owners should analyze their year-to-date profit variance, which is the difference between what was budgeted and actual performance, to determine if they are on-track with their budgeted expectations. Owners should also make three-month cash projections so they will have the information necessary to make decisions about up-coming cash needs. Finally, owners should calculate, by product and service type, their year-to-date gross profit margin to ensure that the cost of their sales is as expected. Owners can obtain these numbers from their accounting software.
- You must compare what how much money you have actually made with what you projected to make.
- Plan for whether or not you will have the cash flow to pay your bills.
- Always be aware of the cost associated with making money.
“Remember: structure follows strategy (not the other way around)! When planning improvements, evidence-based decisions should inform strategy, which in turn will guide you in the structure to move forward and achieve your goals.”