Do you know where your money goes?By Nina Kaufman, Esq.
I love Fall. Back-to-school time. School supply shopping. Fond memories of walking across my leafy green Wellesley college campus with a knapsack full of notebooks. (Yes, I’m a nerd. And proud).
One of my newer clients, Denyse, hates it. She runs a social media firm based outside of Boston. For her, it’s “come-to-Jesus” time. Because it’s the time of year that, once again, she sees she wasn’t paying close enough attention to her numbers.
I get it. Sometimes, analyzing your numbers is as enticing as scrubbing a toilet with a toothbrush.
On a recent coaching call, she said I’m making a million dollars a year, but never seem to have money in the bank. WHY?
It comes down to habits.
A habit is a routine behavior done on a regular basis. Like when dieting. Or training for a marathon.
What are the actions you do repeatedly? And do those actions move you in the direction you want?
Denyse — and other clients like her — had some, ummm, less-than-optimal habits around the numbers in her business.
For example, she needed to:
- Invoice like clockwork. Same time (or times) every month.
- Find out each customer’s payment process, so her invoices could have the right form, data points, and amounts to be paid quickly.
- Collections: Have a regular calendar for follow-up on payments.
- Read her financial statements every 1-4 weeks and understand what the P&L, Balance Sheet, and Cash Flow Statement were telling her.
- Take taxes into account when counting available cash.
- Know her direct labor costs and overhead per project to gauge profitability.
- Analyze line items on a quarterly basis, like recurring SaaS payments (which add up).
- Develop a budget, so she didn’t have to draw on credit lines to shore up operations.
- Stop spending more when she made more. Yes, you work hard and deserve a treat. But some business owners take it too far, like Max Bialystock from one of my favorite films, The Producers (1968).
So now we’re setting Denyse up for success by putting different habits (systems) in place. And holding her feet to the fire so she follows through.
Are there better habits you’d like to have in your business?
Want to learn more about Kaufman Business Law? This is the video to watch.