5 simple steps to consistently review your business numbers
Having your numbers up to date in your bookkeeping program is one thing, knowing what to do with those numbers is another thing entirely (if you’re having trouble keeping up with your bookkeeping then go read this blog post, ‘How to be consistent with your bookkeeping ‘ ).
So, what do you do with all those numbers? There are 4 key areas I recommend you review on a regular basis. Ideally, I want my clients to review their numbers at the end of each week, but this will depend on the size of the business and number of transactions you have. A monthly review is the minimum.
Make it easier to create a regular habit by setting aside allocated time in your calendar- 1/2 hour will do it.
4 Areas to Review
1. Your transactions
I run an accounts transaction list in Xero for the last week and scroll through the transaction to see if all the transaction descriptions and coding are correct.
Keep an eye out for GST transactions, i.e. if GST is showing against a bank fee that needs to be fixed as GST doesn't apply on bank charges.
2. Your profit and loss (P&L)
In this step, I start by printing the P&L report for the week to the screen. I then compare the numbers to the same time last year.
If this year's numbers are less than what you wanted, then look at what has caused this - maybe a large annual payment has gone out. When you have this information, you can decide what to do depending on the cashflow impact, i.e. look around for something cheaper or do monthly payments instead.
3. Your budget
Next, compare your current figures to your budget.
Are the numbers tracking as you expected?
Was your income lower? Do you need to cut down on expenses?
Was your income higher and you can buy that new laptop sooner?
Knowing your numbers means you can make better decisions for your business.
4. Your GST and Tax
Then, check if you have enough cash to cover any upcoming payments for GST and tax. I like to run a balance sheet report to show me this information.
By regularly checking these numbers you’ll never be caught unprepared when it comes to your tax obligations.
5. Action
The last step is to create an action list from your review. You might need to follow up non-paying clients and ask them to pay or agree a payment arrangement. Or it may be time to review your insurance policy and premium to see if you can find something cheaper for the same cover.
Practise makes perfect when it comes to reviewing your numbers. The more you do this task the quicker it will become, and the easier it will be for you to understand your numbers.
I’ve also written a blog post that contains a broader list of topics for you to review at the end of the year.
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