Are you keeping an eye on your business’s finances? Many businesses fail to grow because of poor financial management. You should check your finances regularly. And remember to track your original financial projections against your actual business results.
Check your financial reports and projections
Having up-to-date financial reports is vital. You might do your bookkeeping yourself, or ask a professional to help you. Three important financial reports are the balance sheet, profit-and-loss statement and cash flow statement. (Business Victoria have a free template to help you create these reports.) Produce the reports and analyse them to answer the following questions:
- How do your actual results compare to your initial financial projections? Did your business do better or worse than you thought it would?
Do you have a plan (and systems) in place to ensure your business keeps growing?
- Do you need outside help (e.g. from an accountant or bookkeeper) to put your plan into action?
Aim for profit
While a new business can take a while to make money, always try to make a profit. For example, if your business expenses are increasing, consider raising your prices.
Remember, net operating cash flow is the amount of cash in your business after you’ve paid the bills. If your net operating cash flow is less than profit after tax, you’re spending more than you earn.
- This article is adapted from the Business Victoria resource Create Opportunities to Grow your Business.
- For more information about finances, see the Business Victoria article Understand Basic Bookkeeping Principles. It explains financial reporting in more detail, so you can check and manage your business finances.
- Check out the Business Victoria Financial Statements Template. This template can help you prepare a profit and loss statement (P&L), cash flow statement and balance sheet for your business.