Money is only a tool. It will take you wherever you wish, but it will not replace you as the driver. -Ayn Rand
July officially marks the second half of the year. It’s usually the time of year where some people plan summer events, vacations, or start a new outdoor activity. For entrepreneurs like me, this IS the best time to plan the rest of the year and fine tune your financial plan. It is also the best way to see if your business is profitable Why do a random check on your business? There are several reasons, but I will list the ones that are straightforward:
1). The IRS and your state’s department of revenue would appreciate an estimate tax payment.
2). It gives you a chance to assess your business for the first half of the year.
3). You are supposed to check your financial performance at least 4 times a year anyway.
4). You can plan and make better decisions if you understand what decisions were made in the past.
Here are some steps to do a financial “check-up” on your business.
1). Review your income statement and compare it to your budget. Do you notice anything that you can change today?
2). Use your budget again to see if you can trim some “fat” from your break-even target. Can you renegotiate some contracts with fixed monthly payments?
3). Look at your cash flow statement and see if the total cash flow from operations is positive. If it is not positive, do a lot of people owe you money?
4). Read your bank statement for unusual charges, but mainly for overdraft charges. Ask yourself “Is there a way you can get money in your bank account faster?”
5). Pull out your balance sheet and verify that who you owe is actually on that financial statement and for the correct amount. All too often, I encounter business owners who don’t know who they owe and in most cases bill payments are not recorded correctly.
So after I rattled off a financial “Honey-Do” list, are you able to do your check-up today? Tomorrow? Next week? Just in case you need it, I have got some helpful tools and links below.
Self-Employment Tax Calculator
IRS Small Business Tax Workshop
How Managers Should Read Financial Statements
SCORE Cash Flow/Budget Template
If you are still not ready to do the check-up at full steam or you are unsure of how to proceed, get it touch with me. I am here to help!
Jéneen R. Perkins is a freelance accountant and consultant serving entrepreneurs, families and small businesses. She prides herself in being fluent in English instead of “Accountant-ese”.
"Putting My Money Where My Mouth Is" is a journal about real life experiences and answers to tough tax questions posed to Jéneen R. Perkins, Owner of Eclat Enterprises, LLC