The economy is bouncing back … slowly. Sales are picking up … to some degree. So how is your business doing??
Not sure how to answer that question? Maybe you should give your business a weekly accounting checkup. Compare your own results, week to week, to look for signs of improvement or trouble areas that need your attention. What stats should you be checking? Every business is different, but these are a great starting point:
Cash balance: What is your cash balance in your checking account now and do you have enough cash to pay the bills that will be due in the next two weeks? If not, can you expect to collect any receivables in the next couple days? You should project out your cash balance at least one or two weeks to address any possible cash crisis before it hits.
Problems? In the short term, you should cut some expenses or shift some expenses from fixed expenses (the same every month) to variable expenses (those that are lower when your sales are lower, but increase when your sales increase). Any way that you can “ramp down” your expenses during the slow times will help you hold on to the cash that you have. Still looking at a cash crunch in the next two weeks? Explore ways that you can request extended terms from your vendors or look into a line of credit from your local bank or credit union.
Receivables: What payments do your clients owe you and are any of them late? If so, how late are they??
Problems? A friendly note may be all that’s needed to shake loose some of those payments. Instituting a finance charge on overdue invoices might give others the incentive they need to pay your invoice. In the near future, you might want to consider running credit checks on new clients to weed out those with poor repayment records. Another option is to establish more-aggressive payment terms or a substantial downpayment and payment before final delivery.
Sales: Are you on target against your projections?
Problems? What is the reason for the drop in sales and what can you do about it? A small investment in a marketing coach might help you rethink your approach to landing new clients.
Billable time: Do you have enough time to produce the work that you’ve already sold? What jobs are going to have deadlines in the next two weeks and are you going to meet them?
Problems? You may to need to bring in subcontractors or some administrative assistance to meet deadlines. Is that in the budget? Figuring that out now, before the crisis hits, might mean the difference between a happy customer and an ex-customer.
Deb Howard Greenleaf, EA, CEO and Principal, of Greenleaf Accounting Services provides virtual accounting and bookkeeping services and specializes in financial management to consultants, coaches, solo professionals, and other small business owners across the US. Deb is an Enrolled Agent (EA)—an IRS-licensed tax professional—and specializes in small businesses and entrepreneurs filing Schedule C or as an LLC. As an Advanced Certified QuickBooks ProAdvisor, Deb spends her day in QuickBooks Online and specializes in providing QBO support.