Cash Checkups: The Pulse of Your Business Success
Business owners have their plates full with decisions to make, teams to manage, and strategies to implement. Yet, amongst all the hustle and bustle, there lies a crucial task often relegated to the bottom of the to-do list: reviewing the company's financial records. It’s a task easy to postpone, but doing so can have significant ramifications. So, how frequently should a business owner really take a peek at those numbers?
Frequency is Key
One might assume that constantly checking the Profit & Loss statement, balance sheet, and cash flow statements would be the best practice. But the reality? Doing so every week might be overwhelming and might not offer a comprehensive picture due to the frequent financial ebbs and flows such as imminent payroll or an upcoming AMX payment.
However, waiting too long can also be detrimental. You miss the window of opportunity to make timely strategic decisions. That's why, as a rule of thumb, it's advised that business owners review their financial reports at least once a month, specifically by the 15th of the subsequent month. For instance, your July financials should be on your desk no later than August 15th. If they're not, it might be time to consider a chat with your bookkeeper or accountant to expedite things.
Weekly Metrics: The Heartbeat of Your Business
While in-depth monthly reviews are essential, there are still key metrics businesses should monitor on a weekly basis. This doesn't involve a deep dive into every financial report but rather a focus on some Key Performance Indicators (KPIs) that give a pulse on the health and performance of the company.
KPIs can differ vastly depending on the nature of your business. It could be the number of sales calls, bank deposits, accounts receivable, or payables. Whatever these metrics are, they should be significant indicators of your business's performance. By tracking these on a weekly dashboard, you get a visual snapshot that can be shared with key leadership. Think of it as a regular health check-up for your company, allowing for proactive adjustments.
Conclusion
A business's financial health can often mirror the overall health and trajectory of the business. By ensuring timely reviews and keeping a close eye on those pivotal KPIs, business owners arm themselves with the knowledge to steer their ship effectively. Remember, it's not just about looking at the numbers, but understanding them to make informed decisions.