Four things to check on your financials this month
Today, I’m going to do a mini-training on the four things a CEO of a services-based business should look at on her financial statements each and every 👏🏻 single 👏🏻 month. 👏🏻
Why??
Well, if I know anything about you, friend, you are probably ready to take the next steps to hit that 7- or multiple 7-figure milestone in your business.
Here’s the prob though:
I know *you know* that glancing at the sales number on the P&L statement your bookkeeper sends each month is about 10% of the work I need you to do in order to ensure your biz is ‘on track’ financially to hit your big growth goals….
But what if your schedule/brain is FULL?
✅ You have a bookkeeper.
✅ You have a CPA.
✅ You’re good with the $$ stuff, right??
❌ I mean, no… not really..
Friend - if you feel like closing this newsletter - I see you.
I know talking about money is suuuuper triggering… aka not a great way to start your week.
But I can almost promise you that the hardest part of getting on top of your business’ finances is probably going to be looking at the numbers the first time.
And I sincerely want to help you avoid a situation where you have $240k revenue months (Yay! So great!), but it doesn’t *really* matter if you have operating expenses of $265k because you don’t have a sustainable biz... and, unfortunately, you’ll be done soon if you don’t course correct.
So please stick with me or at least plan to read this later. I promise it will be helpful, friend. :)
Let’s do a mini-training on the four things a CEO of a services-based business should look at on her financial statements each and every month: ➡️ ➡️ ➡️
Say that this CEO has just received her July 31, 2023, financial statements from her bookkeeper via email.
Here’s the short version.
She should look at:
Total sales
Net Income
Industry-specific “key” expenses (in this case, wages and rent)
Cash/account balances
Bonus points items
Here’s the long version:
Prep - Get a cup of English breakfast tea with milk and a nice lemon blueberry scone. 😍😍😍 Open up said financials and get out your phone’s calculator app.
Step 1 - Gross Revenue
Look at your total sales, income, revenue or gross revenue (terminology is confusing, but these words all essentially mean the same thing)
Compare July to June. What’s the trend? Did sales go up or down? Does the change seem reasonable? Can you explain what happened?
Step 2 - Check out your net income (or net profit) which is calculated as sales less expenses.
Compare July to June. Look at the number and get curious - did it go up or down? What’s the trend? Can you explain why it increased or decreased?
Step 3 - Look at your key (industry-specific) expenses
Look at your largest expense and compare what it did between July and June. For this biz owner, her largest expense is wages. This expense is unique in that it is large and most likely fluctuates month to month.
Look at your other 2 largest expenses and compare July to June. Calculate the change and ask “What caused the change?” Again, use your numbers to tell a story.
BIG NOTE: If you can’t tell the story of what’s going on with your income statement (i.e. you thought you had revenue of $45k in July, but your P&L shows $15k), I need you to follow up with your bookkeeper and ask questions.
Step 4 - Cash/balances
Check your cash balance on your balance sheet. Did it go up or down in July? Does this make sense to you?
Check your business’ bank accounts - balances and transactions. Anything fishy?
Check your business’ credit card or LOC accounts - balance and transactions. Anything weird? Typically, you only have 30 days to report suspicious transactions.
That’s it.
Bonus Points ⭐️⭐️⭐️⭐️
Calculate your profit margin % by taking your net income divided by your revenue to get a %% (net income/revenue). What’s the trend month-to-month? Is it going up or down?
THE MOST BONUS POINTS: Check out Canadian Industry Statistics to see how your profit margin stacks up to others in Canada
Calculate your current ratio (current assets/current liabilities) and compare the trend; aim for above 1.0 (i.e. more than $1 in short-term assets for every $1 in short-term debt)
Look at your accounts receivable balance - what is it doing month to month? Do you have to follow up on any outstanding invoices?
Friend, if you want help determining which ratios/numbers you should be tracking to increase profitability or determine what sh*t financial decisions you’re making today that will hurt you tomorrow, 7-Fig CEO is perfect for you ⬇️.
I’ll help by mentoring you 1:1 to lead your business in a way that helps you **profitably** achieve your goals like expanding into that second location or exploring a passive income opportunity. Aka I’ll keep my eyes on the numbers so you can focus on the growth. 📈
You’ll also get the support of my team of CPAs and admin/systems experts because I can design the most beautiful strategy in the world for you, but I can’t give you more than 24hrs in your day. My team will help you and your team with the execution and implementation of your strategic plan.
Ready to take the first step?
Take care and talk soon,
Tanya