Note: This blog first appeared on Supportingstrategies.com.
By Cheri Giglia
You can move forward with confidence when you’ve got solid financials to fall back on — starting with good bookkeeping and controller services support.
Whether you’re planning to add a new line of business, open a new location, or simply upgrade equipment, following these bookkeeping tips will help you grow your business with confidence. As the COVID-19 pandemic has made all too clear, uncertainty is the only certainty in business. But that’s not to say we should all just surrender to chance. In fact, the opposite is true: Growing your business in uncertain times requires focusing on what you know for sure. And the one thing we can say for sure about every business, no matter the size, scope or circumstance, is this: Cash is king.
So let’s start there. If you want to grow your business, you need to stay on top of your cash flow.
Saying you need to watch your cash flow is like saying you need to watch your diet. Everyone understands it’s good advice — but actually following it can be a challenge.
Fortunately, cash is easier to count than calories. If you set up your bookkeeping system properly, you’ll be able to track your cash flow precisely, in real time. And that means you can easily track your revenue and expenses in the part of your business that you intend to grow.
Once you identify your goal, you can stake out a realistic plan for pursuing it. That consists primarily of two simple steps:
- Run best-case/worst-case forecasts to determine how long your cash would last if your revenue expectations fall short.
- Pinpoint potential disruptions, such as supply chain issues, and work out contingency plans.
In an ideal world, you’d never need financing to grow your business, let alone to stay in business. But as the mad scramble for Paycheck Protection Program (PPP) loans illustrated, it’s far better to have financial backup and not need it than to need it and not have it.
With that in mind, you should take these steps today to prepare for tomorrow:
- Establish a good working relationship with your bank.
- Get your books in order so they can be used to support your loan or credit applications.
- Set up financing options such as credit cards and lines of credit.
Cutting unnecessary expenses is good advice under any circumstances. Why pay for things you don’t need or absorb higher service costs than you have to? But you can apply due diligence to track down wasteful spending. For example:
- Compare costs of essential services, including IT and utilities.
- Weed out unnecessary expenses, such as subscriptions you don’t use.
- Cut your own underperforming products or services.
Building on Solid Ground
The key to maximizing growth is to have bookkeeping systems in place that apprise you of both potential opportunities and emerging risks. It’s vital to set up your chart of accounts (COA) with enough specificity to indicate where noteworthy shifts are occurring. That’s especially important as you implement growth strategies.
When you open a new location, launch a new product or introduce a new service, your COA must track profit and loss (P&L) for that new initiative. If you open a new location, for example, you must be able to compare P&L at the new location relative to the P&L at your existing locations to determine the impact of the change. If the new location exceeds your expectations, great — you can consider funneling even more resources into it. If it falls short of expectations, you have to figure out why and decide on a mitigation strategy.
And as always, you must watch your overall cash flow. That means keeping your books up to date. It means running weekly forecasts to take new data into account. And it means staying on top of financial obligations — especially if revenue falls short of your forecasts.
A Measure of Success
Really, what all of this boils down to is common sense. And the best lesson any business leader should take from these last few turbulent years is this: As you grow your company, plan for success — but don’t plan on success.
Learn More About Common Sense Business Growth
- Managing Your Business During a Crisis: Find in-depth information on how you can position your business for success.
- Power Your Business Growth: Learn how you can set up your chart of accounts to analyze the profitability of different service types.
- How You Can Use Bookkeeping to Prepare for Business Growth: Find out more about how professional bookkeeping provides financial insight you can use to grow your business.
- Extension Engine: Read this case study for a real-world example of how a client used bookkeeping data to inform their strategic planning.
At Supporting Strategies, our experienced, U.S.-based professionals use secure, best-of-breed technology and a proven process to provide a full suite of bookkeeping and controller services. Are you ready to learn how you can move your business forward? Contact Supporting Strategies today.