Can you believe that we’re coming up on the mid-point of 2021? Time sure flies when you’re running your own business! It’s a real challenge to take a pause to do a “check-up” on your business to make sure it’s financially healthy. Mid-year is the perfect time for a business finance check-up to see if that financial health is tip-top!
Think about it…your physical health and your business’s financial health are remarkably similar. A sudden loss of income or an unexpected expense can stop your business cold, just like a medical crisis can stop your body from functioning. A check-up can detect serious problems that you cannot see or feel, many of which are preventable if you take a pause for a finance check-up.
At minimum, a mid-year business finance check-up should cover these three areas:
- Compare Actual Results to Plans
Financial performance should be compared to your planned budget to determine how actual events compare to what you thought would happen. Focus on variances in income and expense categories that most significantly impact achieving your business goals. If the budget or plan was not met, figure out why. Did conditions change? Were assumptions realistic? Focus on “why” to refine future budgets and plans.
- Cash Flow
Project your business cash inflows and outflows for at least three months, working up to six months or more when you get more comfortable with the process. Determine whether expected income will cover expected (and some unexpected) expenses using information on-hand about payments receivable and payable, scheduled payments, like payroll and rent, and bank account balances. Be realistic about payment timing and amounts.
- Expense Control
Spending control is the most important and most difficult part of running a business. Demands to fund day-to-day operations, in addition to investing in technology and infrastructure, are constant. Prioritize essential expenses and ensure that other planned expenses are within established parameters. Carefully assess the need for any unplanned expenses to ensure that they contribute to meeting your business objectives.
Your physical health and your business’s financial health are remarkably similar. Both need a periodic check-up to detect an unforeseen problem that can stop your body or your business cold. Taking a pause for a business financial check-up is challenging, but necessary. Now, at the mid-point of 2021, is the perfect time for a business finance check-up to make sure that its financial health is in tip-top shape!