Chapter 12 - Finance Review for Existing Small Businesses
- Sonya Grattan
- May 29
- 4 min read
Congratulations, what an achievement! You've been trading for a while now so your focus is not only on providing great service but on checking how things are going. In this chapter, we will look at how to do this.
Why do you need to do a money check? Reviewing your finances regularly is always good practice as it gives you insights into where your money is going and helps you make adjustments when needed.
What can I do to make a finance review easier for my small business?
One of the best ways to prepare for a financial review is to keep your business bookkeeping up to date. Accurate bookkeeping will provide the information you need to review your finances, and software makes it easy.
Also helpful:
Use a business credit card
Rather than a personal credit card, use a business credit card or charge card for purchases. This makes it easy to see business expenses at a glance.
Use a business account
A business bank account should be “command central” for your business finances. If you use other types of accounts to get paid (like PayPal, Amazon, for instance), consider transferring those funds into your business bank account so you have a clear picture of how much money your business brings in.
Consider using metrics to track any variances in your cash. Here are some common metrics you’ll want to consider; again, depending on your business model. Take a look at my blogs Let Your Dashboard Drive You and Variance Analysis - How can this help you
Additionally, you may need to look at your Pricing strategy and consider whether you need to adjust prices, and how cash flow will be impacted during both busy and slow periods. Take a look at my blog about financing your business
No one can predict the future with complete accuracy, so consider multiple scenarios – best case, worst case, and most likely.
Compare your Cashflow Forecast with actual Cash
A great place to start is to look at your cashflow forecast and check its accuracy, make amendments if needed. Are your start up costs as predicted? If you have not done a forecast, it’s never too late, check out my blog post Step by Step Guide for Small Businesses - Creating a Cashflow Forecast.
Look at where there is a negative cashflow, (sales minus expenses) what causes this,
was it an oversight on your original figures?
did something cost more than anticipated?
are you withdrawing more from the business account?
are your sales/income not as high as expected?
Whatever the reason, it is having a negative impact on your business and you need to use this information to make your business more cost-effective. You may find opportunities to streamline your business while also achieving cost savings.
Do you need to pay as many people as you are currently doing? many businesses are reducing office space by offering hybrid or remote work. This can cut down on overhead costs, while providing a perk that may help attract or retain full-time employees.
A financial checkup can be a solid opportunity to practice goal setting and financial planning for your small business.
If you have higher expenses one period, a financial check up can help you identify the need to trim business expenses or increase revenue so you can still reach your goals.
Here are some activities that can be helpful in this review.
Set key performance indicators (KPIs) and review their metrics.
Review and project your cash flow. Make sure you set a cash flow budget and review it against actual at least on a quarterly basis. Remember “cash is king”!
Record expenses. Remember that many business expenses can help reduce your tax liability. Tracking your expenses as you go (or at least quarterly) trims the headache at tax season. Don’t forget to save the receipts in case of an IRS audit.
Check for fraud. Reviewing your business credit and business transactions can help you identify suspicious activity.
Review and set your budget. Consider your revenue and business costs for the previous quarter and to tweak your budget for the upcoming quarter. Don’t forget about upcoming quarterly estimated tax payments.
Review recurring expenses. You may be able to save money by cancelling apps or subscriptions you don’t need, or by switching to quarterly or annual payments for those you do want to continue.
Review retirement savings. Self-employed people often contribute to their own retirement. Plan to deposit tax-advantaged contributions to your retirement account at least quarterly (if not monthly or bi-weekly).
Annually
Review your income statement, balance sheet, and cash flow. These are the three important financial statements for any business. Your business mentor, or tax professional should be able to help you if you don’t know how to do this yourself.
Consider business goals you’ve already set and measure your progress for the year. If you have yet to set financial goals, analyse your data over the course of the year, and use this information to set future goals.
Make these goals achievable and develop a road map for how to get there. You can even use this opportunity to revise your business plan, which will eventually evolve.
Conducting periodic financial reviews should be prioritised as you can learn such a lot from them, and in doing so your business will grow.
Other Chapters in this series so far:-
Chapter 1 - A Business Idea - Lets Make it Happen
Chapter 2 - Target Your Market
Chapter 3 - Land Your Brand
Chapter 4 - The Price is Right
Chapter 5 - Lets Get Down to Business
Chapter 6 - Its All in the Name
Chapter 7 - Location Location Location
Chapter 8 - Financing your New Business
Chapter 9 - Matching Job and Employee
Chapter 10 - Law and Taxes: Play it Smart, Stay Sharp
Chapter 11 - Kick off Your Business with a Bang
Chapter 12 - Financial Review for your Small Business
Look out for the next chapter.
The Lead Coach is always available should you need any further help with your new business. Just fill in the contact form on my website www.theleadcoach.biz
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