Much like post-Thanksgiving pounds, money problems don’t just go away. But the sooner you recognize that something’s wrong, the easier it is to fix it. This is why you should review your financials regularly to get comfortable enough with the numbers that you can easily spot when something’s wrong. At the very least, review your P&L every month, PRO-TIP: set up your financial reporting software to automatically send it to you!
Why does it matter? Because if you’re very busy (yay!), you may not be aware that a client hasn’t paid you or that your costs have increased, but your revenue hasn’t or that your revenue has grown, but your costs haven’t.
Now, that last one might seem like a good problem, but you should be asking WHY??? It’s likely something simple like, you’re missing an invoice. If you’re not paying attention, you may spend that money and when the invoice finally does come in, you don’t have the money to pay it. But something else to consider, as much as we’d like costs to stay the same forever, it’s just not realistic. Make sure you’re thinking about what POTENTIAL cost increases might be coming your way before you go spending all your cash. Make reviewing your financials a regular exercise and here’s a few tips how:
1. Make a date
Pick the same day every week or every month. Set an appointment on your calendar, block off time, be as disciplined about that as you are about researching White Lotus season finale theories. The biggest mistake I see is people putting their heads in the sand — “if I don’t look, nothing bad can happen.” I assure you, something worse can happen.
2. Look for patterns
Look for patterns within your business and over time. You can only do that if you’re consistently looking at your financials. Identifying those patterns makes it easier and quicker to spot issues, because you don’t have to look at every number. You can say, “I know this number’s supposed to be in this range” Then you only need to dig in deeper when there’s an anomaly.
3. Take an expedition
What if something looks off, then what? We go on an expedition. If you know your software costs are $500 every month, but this month they are $900, then dig into that $900 and see what happened. “WTF, I was charged 3x, I better call my credit card company” or “Oh, I paid an annual fee this month” Whatever the reason, make sure you understand WHY.
4. Set a standard
It’s really easy to spend money on credit cards, especially on dues and subscriptions — honestly, that’s where money goes to die. Checking your financials every month holds you to a standard of spending. If you see an Adobe charge come through, and you know you haven’t used Adobe for months, you’re more likely to cancel it if it’s staring you in the face every. single. month.
Having that discipline of looking at your financials every month holds a mirror up to the business and says, “Is this something we really need to be spending on?” And you can recast that decision every month as you’re reviewing your financials.
5. Ask for help if you need it
Why take these steps now? Avoid the January gym effect. Now is a perfect time to shed those financial pounds, so you’ll be in good shape for the new year. If any or all of this sounds overwhelming, call me, it’s much less scary if someone is holding your hand. And maybe even enjoyable if you’re holding mine =)