3 Financial Exercises for Small Business Owners

Staying financially fit is crucial for the success and sustainability of any business. Dillon Business Advisors' accountants and CPAs have compiled a list of tasks every small business owner should do each month. Check out the list below. 

Boosting Business Health

Exercises are not only for growing muscles and shrinking waistlines. Vanity metrics like top line revenue or even acquiring status symbols such as big houses, expensive cars, or nice watches are common ways small business owners “flex” or show off their financial success. But, in order to actually flex, every small business owner needs to get (or stay) financially fit. Here are the three essential financial exercises that small business owners should aim to do each month to maintain financial health.

1. Review Financial Statements

• Profit and Loss Statement (P&L)

  Analyze your monthly P&L statement to understand your revenue, expenses, and net profit. Identify any unusual trends or fluctuations that may require attention.
  
  

• Balance Sheet

  Examine your balance sheet to assess the overall financial health of your business. This includes assets, liabilities, and equity. Monitor changes in key accounts, such as cash, accounts receivable, and accounts payable.
  
  

• Cash Flow Statement

  Regularly review your cash flow statement to ensure that your business has sufficient liquidity. Identify any potential cash flow challenges and take proactive measures to address them.
  
  

2. Expense Management

• Expense Tracking

  Keep a close eye on your business expenses by reviewing your bank statements and credit card statements each month. This allows evaluation of expenses to renegotiate, eliminate, or even to catch fraudulent charges. All expenses should be reviewed and categorized to identify areas where costs can be reduced or optimized.
  
  

• Budget vs. Actual Analysis

  Compare your actual expenses against the budgeted amounts. If there are significant variances, investigate the reasons behind them and adjust your future budgets accordingly.
  
  

• Negotiate Contracts and Vendors

  Periodically review contracts and agreements with vendors. Negotiate better terms, explore discounts, or consider alternative suppliers to reduce costs.
  
  

3. Customer and Revenue Analysis

• Customer Retention Analysis

  Evaluate customer retention rates and identify strategies to retain existing customers. Satisfied and loyal customers contribute significantly to long-term revenue.

• Revenue Sources

  Analyze your sources of revenue to identify which products or services are most profitable. Focus on promoting and improving high-margin offerings while assessing the viability of low-performing ones.
  
  

• Sales Funnel Review

  Examine your sales funnel to identify any bottlenecks or inefficiencies. Streamline the sales process and explore ways to increase conversion rates at each stage.

Who has time for this financial workout?

Staying financially fit is crucial for the success and sustainability of any business. By consistently performing these financial tasks each month, business owners can gain a deeper understanding of their company's financial position, make informed decisions, and proactively address challenges. Additionally, staying on top of financial management helps create a foundation for long-term business success. But, it does require time and effort. You can enlist help from business partners or your accounting firm. Scheduling time on your calendar is the first step to making this monthly workout happen. 

Is your CPA adding value?

Our small business CPA firm implements a Team of 3 accounting, tax, and advisory professionals in small businesses to help busy owners create, grow, and sustain successful businesses that positively impact their communities. This team of 3 keeps your income and expenses optimized for your business goals and provides monthly financial statements. The team also offers recommendations and opportunities for increasing revenue and minimizing tax liability. Dillon Business Advisors initiates monthly or quarterly consultations to support the financial health of each client and their business. 

At Dillon Business Advisors, we work with owners just like you. Let’s schedule a call to start planning for your future.