How much are you really making?

Today I have one simple question for you:

Do you really know how much you’re making?

You know how much you charge for your product or service. Hopefully, you also know your operating costs: equipment, software, materials, and so on. But are you aware of the less obvious expenses, and how they factor into your revenue? Could you be spending less on specific resources?

These small details can mean the difference between making a profit or barely breaking even by the end of the month. This week, we’re going to look into why tracking revenue and expenses is so important for the success of your business.

Know where the money is going and eliminate needless spending

The most important reason for keeping a close eye on business finances is to know how money is being spent, and to find out which expenses can be streamlined or eliminated. If you have a large chunk of money going into an internet or phone service provider, for example, it might be time to shop around for a better deal. Or you might be spending too much money on advertising that’s not paying off. A detailed breakdown of expenses can help you see problem areas and fix them before they get out of hand.

Evaluate stability and meet financial objectives

A detailed breakdown of your finances will also help you determine the health of your business. If you’ve developed a business plan, you’ll already have an idea of what it’s going to take for your business to thrive and what your longterm objectives are. With your business in full swing, you need to keep those objectives in mind and regularly evaluate if you’re meeting them. A solid grasp of your expenses and revenue is crucial to understanding whether you’re on the right path or headed in the wrong direction.

Be ready for tax time

Tax season will never be the most fun part of the year, no matter how organized you are. But it’s certainly much easier when you have all the information you need on hand. Understanding your finances will also help you figure out deductibles, and where you can get some money back from expenses such as travel, utilities, and supplies.

Plan for the future

Having all this data at your fingertips is also a powerful resource for predicting the future of your business. If things continue at their present rate, will you be able to make a profit months or even years down the line? Will you be able to take advantage of promising trends, or will you lag behind because your revenue is not as it should be?

Revenue tracking can feel intimidating, but there are resources that can help keep things sane. Hiring an accountant is a good start, of course, since you’ll have an expert in the field. Accounting software (Quickbooks, for example) can also help you calculate revenue and expenses, and even make filing taxes easier.

So how is your business doing? Are you thriving or just surviving? Reach out and share with me .... [email protected]