Running your business without correct financial reports is like driving a car without gauges. You’d be left to guess at your speed, fuel, or engine temperature warnings. Does that sound like what you’re experiencing in your business?
Every day I meet with business owners that don’t know their GM% or how much profit is needed to “cover their nut”. When provided with a P+L and balance sheet, I find that bank accounts haven’t been reconciled for weeks, sometimes months. By that point, getting your books back under control will be a much bigger task in an already overbooked work week.
Here are 5 (of many) reasons why business owners should review their books at least once a week.
1.Data Entry Mistakes:
Even the best of us make mistakes. Simple keystroke errors by your bookkeeper or a vendor are going to happen from time to time. An extra digit here and there can wreak havoc on a company’s books, especially over time. Looking at your books at least once a week can help you spot errors and address them immediately, rather than trying to find a needle in a haystack months later. This is particularly important if you’re trying to grow your business.
2. Unnoticed Rising Costs:
Reviewing your Gross Margin Percentage weekly allows for you to respond to sudden, unnoticed increases in your costs. Price increases on items such as gas, maintenance parts, contract labor, shipping; and more can hit quickly and have a huge impact on your profits. Not only is it important to know that costs are rising, but when and exactly how much is critical information you need. Unless you’re paying attention, you could lose tens of thousands of dollars or more without even knowing it.
3. Old Pricing:
When is the last time you updated your price lists? Reviewing your Gross Margin Percentage each week can also help make sure your employees are using the latest price lists. Your sales team could be selling items based on a 2020 catalogue and price list, while you’re ordering and paying 2022 costs! If that’s happened to you before, then you know what I’m talking about here. Reviewing weekly will help you mitigate that problem almost completely.
4. It Builds Discipline:
In the “fog of war” of day to day business, owners are pulled in one direction after another. Payables, ordering, HR issues, inventory…. the list of things needing attention is never ending. That’s why taking just one hour a week to review your books is so important. Pick one day a week, every week, to review key performance indicators like revenue, margin, payroll, overtime and others to make sure numbers look right. Don’t confuse right with good here. Your books can be accurate and bad (off target) or accurate and good (on target), but inaccurate books are always bad (no idea where the target is). With practice and some delegation, over time, these reports can take less than an hour to review.
5. You Actually Get Time Back:
There’s an old adage to reference here… “Slow down to speed up”. Slowing down to ensure accuracy weekly leads to discovering problems, trends or inaccuracies from your financials early on, saving you hours upon hours looking for mistakes later. You can use all your newly found time selling to more customers, training your employees or taking some well deserved time off, even if it’s just a few hours at a time.
To find out more, or if you aren’t really sure where to start, give Part Time Business Partners a call today.