Pick a day of the week or month that the books will need to be updated by. Decide on a few key performance metrics that you can review and set a time, every single month to review and compare these metrics. Use these indicators to adjust your sales and operating initiatives. Not sure what metrics to look at? Read on…
2. Visualize cash-flow
It doesn’t matter if it's in a fancy spreadsheet, scribbler or back of a paper napkin, having some sense of what your cash in and outflows will look like for, at the very least, the next 12 months will help you make better business decisions. For example, if you go through the exercise of creating a projection, things might look tight in the next six months which means you can do something about it now, like increasing your sales initiatives. If things look decent, you may decide to purchase a badly needed piece of equipment that you otherwise may not have purchased. This should be a living document that you will adjust frequently and add to your numbers-habit. Need help setting this up? It's all in a day's pay for your accountant.
3. Prioritize profit
People spend a disproportionate amount of energy trying to reduce taxes or cut costs, when increasing profit exerts much less energy and puts more money in your pocket. I get it, we’ve been taught since childhood that a penny saved is a penny earned, right? Well, pennies are out of circulation, and so should be this antiquated notion! A modest increase in your prices is easy-peasy. And it hits your bottom line almost directly. Also, improving your efficiency is a much better use of your energy and it is the profit-gift that keeps on giving. Compare this use of energy to what you will need to expend to find even a 1% savings in your costs. I’m not saying to bail on the notion of prudent spending, just don’t prioritize it over smart profit-maximizing techniques. And, for-the-love-of-Pete, please do not try to reduce your tax bill by spending money! This will make your accountant cringe, but more importantly, it is economically counterproductive. Kind of like the proverbial tail wagging the dog. Adopt a profit mindset.
4. Keep your friends close, but your accountant closer
Do not underestimate the superpowers possessed by a good accountant. A good accountant is one that challenges you to think differently about your business, one that understands that their role isn’t merely to minimize your tax bill, but to help your business perform better. A good accountant can help you decide what metrics to measure and the cadence in which to review them. They can be a wonderful way to create accountability if creating good business habits for yourself, and your team, is a challenge. If this doesn’t sound like your current accountant, keep looking. Building a good relationship with your accountant might be the best investment you will make. Like I always say, keep your friends close, but your accountant closer!