Creating a robust financial management system is THE essential system for your business - after all it's the one system that will show you:
•if your business is making a profit;
•if you can afford to make an investment in a program or product;
•if you can take advantage of an opportunity as it arises;
•or if you can take a salary (also known as Owner's Draw) at the end of each month.
If you don't know where you are financially in your business then you are very quickly going to get into a sticky situation. Today I'd like to share with you three essential reports you need to run on a regular (read: monthly) basis to ensure that your finances stay healthy.
1. Income Analysis:
This is a very simple report that you can set up using a spreadsheet that tracks your monthly income. This is money you receive into your business from clients, products, programs, affiliate commissions - in fact, any income that you receive as part of your business activities you need to list in this report.
This is a very simple report that you can set up using a spreadsheet that tracks your monthly income. This is money you receive into your business from clients, products, programs, affiliate commissions - in fact, any income that you receive as part of your business activities you need to list in this report.
Set up your report so that you monitor the whole year on one spreadsheet, broken down month by month. And also categorize your income so that you can see where your biggest income streams are.
2. Expenditure Analysis:
The flip side to the Income Analysis is the Expenditure Analysis and, again, you can set up a spreadsheet that will track this for you. Like the Income Analysis you'll want to be able to see the whole year at a glance, and have it broken down month by month. You'll also want to be able to see where most of your money goes too - your biggest expenditure items - so you'll need to categorize your expenditure too.
The flip side to the Income Analysis is the Expenditure Analysis and, again, you can set up a spreadsheet that will track this for you. Like the Income Analysis you'll want to be able to see the whole year at a glance, and have it broken down month by month. You'll also want to be able to see where most of your money goes too - your biggest expenditure items - so you'll need to categorize your expenditure too.
Your Expenditure Analysis will contain things like your monthly list management service (e.g. 1ShoppingCart, Aweber, iContact etc.), merchant fees, shopping cart account, membership fees, advertising, website expenses etc. etc.
3. CashFlow Report:
Now that you have Income Analysis and Expenditure Analysis all in place you are all set to create your CashFlow projection. Put simply, a Cashflow projection shows whether your anticipated income will be able to cover your expected (projected) expenses and this report is very beneficial to you in your business; in fact it's a must-have!
Now that you have Income Analysis and Expenditure Analysis all in place you are all set to create your CashFlow projection. Put simply, a Cashflow projection shows whether your anticipated income will be able to cover your expected (projected) expenses and this report is very beneficial to you in your business; in fact it's a must-have!
It is an annual report and, if set up correctly, will show you how your cash will flow through your business throughout the current financial year. Again, setting up a spreadsheet so that your Cashflow is automatically calculated throughout the year is an invaluable tool for your business.
I've been using a Cashflow Report in my business for many years and find it invaluable. I also like to use my Cashflow Report to plan out upcoming expenses too so that I can see exactly when they're due and how they will impact on my finances.
Not only will having a robust financial management system give you peace of mind but it will also mean that you can take advantage of opportunities immediately they arise. For example, just recently the chance to participate in a high-profile teleclass series came up, and because I have my financial systems in place, I knew straightaway that it was something I could afford take part in!
By Tracey Lawton
(c) 2010 Tracey Lawton
Image by Carlos Photos
Image by Carlos Photos
Online Business Development Strategist, Tracey Lawton, teaches online solo service professionals how to create the essential online marketing and office organization systems needed so that they can create a more streamlined, systemized, and automated online business. Check out http://www.officeorganizationsuccess.com for free how-to articles, resources, tips, and tools, and sign up for your free "Office Organization Success Toolkit".
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