‘How To’ Coaching series – Activity 39

Who controls your financials?

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 39 – I regularly review my Margins – daily/weekly/monthly

Following on from blog 38, ‘I know my Margins’, it is a really good idea to monitor the results regularly, then you can decide what aspects of your business are best to develop; or drop/amend if that is your finding.

You can set up a simple report that shows the ongoing results of your margins.  These should be viewed as required to work with your business.

If you have a fast-paced business, you may review your margins daily.  A Stock Exchange monitors the results in real-time.  That’s because a prompt change/correction will have a dramatic effect on the outcome of the business transactions.

A company that works on a multi-year cycle, might review the margins less often.  They would use a different measure to see how they are doing – expected income vs costs against the planed budget to show the profitability of the offering.

 The HowTo bit:

As an example, build a spreadsheet showing income for a given time period and list outgoings (cost of sales & a segment of the operating costs) underneath.  This could look like the table below.

Profit/Loss table

  Monday Tuesday Wednesday Thursday Friday
Income 1000 850 820 1250 915
Cost of sales 180 160 265 190 185
Overheads 300 300 600 300 300
Profit/Loss 520 390 -45 760 430

This table shows the income and costs per day for activity; it does not necessarily reflect the Cash Flow in the business.  The initial questions I would be asking are:  Why are the costs of sales and overheads more on the Wednesday.  It could be that a certain offering is not profitable.  Using the information gives you a reasonable starting point for your investigations.  In real life, the figures are probably not going to be so obvious, so a more detailed table then this example, maybe with the addition of a bar chart diagram, could prove invaluable.

If you would like help defining how you will regularly review your margins, Contact Us

About Alex Petty

Blogger, runner, mentor
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