Chapter 2 – Financial Control – Rule your money
This is part of the ‘How to’ coaching series. An ongoing series of activities to make your business successful. Follow it step by step and see positive results as you develop a robust business model, set on a solid foundation.
Activity 23 – I regularly review key financial trends (key costs, Revenue growth, Employee Productivity)
What do you do to keep a check on what is happening financially within your business?
Do you already have a regular review process that you maintain and follow rigorously?
For those that don’t, now would be a good time to introduce a simple system that allows you to be in charge of your financials, rather than just finding out at some point if you are on track. The key is to monitor the trends – up/down/as expected?
There are many indicators you can use; three useful areas to focus on, are:
- The costs in the business – keep spending in check, both in terms of amount and speed of spend.
- The revenue actually coming in – making sure it’s as expected, and on time to your Ts&Cs.
- Maintaining productivity – keeping the team on target. Do they have the tools, skills and motivation to do the job efficiently?
On the face of it, these measures seem simple and common sense. You may be surprised to learn that many business owners forget to keep an eye on them. It is so very easy to get distracted from these basics.
For example, if you sell chocolate cake, you might want to understand the daily (or even hourly) sales rate…. so that you can make sure you have stock at the right time. so that every customer can buy your cakes; not too much, so you have wastage. This information could then be used to drive marketing to get people buying more cake (or similar products, at other times.
This sort of measuring is done extremely effectively by the big retailers. Doesn’t mean they always get it right, but at least purchasing is based on knowledge of what trends are typically happening verses just guessing.
An example of the benefit of keeping a close eye on the business trends, is a micro business I know that decided to stop trading where they were located, before they made a significant loss. This decision was taken within a short period of time and the, potentially difficult choice was made easier due to the cold hard facts of the financials. They have subsequently changed location and are now on track for a strong profitable business. It was mainly the location of the premises that was causing the issue – not enough footfall.
The ‘How to ‘bit:
Decide what measures you will track and build a chart showing the trend… week on week/month on month/year on year…. whatever is most useful for your business.
Use the output to drive activities that raise the efficiency and effectiveness of your business.
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