By: Amy E. Gibb, MBA, CFP
Thank goodness last year is done and the holidays are behind us. I bet you made some New Year’s Resolutions along the way to didn't you? Maybe you want to lose weight and get in shape. You vow to be nicer to your mother and more patient with your kids.
So what about your business? Did you make a New Year’s Resolution to run the business rather then have it run you? Did you commit to be more profitable, more organized, to grow by 20%, keep more cash in the bank, and be proactive and not reactive? If you know what you want but are struggling with how to get there, here are a few Business Basics to get you started for 2002.
#1- A Plan - It is not too late to do a plan and budget for 2002. Just start with last year’s numbers and adjust from there. If you made a profit last year and did well, you might plan to duplicate your 2001 results. If changes need to be made, adjust your numbers accordingly and get started with those changes immediately. Your plan can be simple or complicated, it doesn't matter, just get it done.
#2 – Focus on Profits - not gross sales. Many business people focus their attention on how much they sell. Growing sales does not guarantee growing profits. Watch the profit line to determine if you are doing well. You might increase your prices or cut costs to generate more profit. Lost sales due to charging higher prices is normal and might be good if the profit from your price increase exceeds the profit from your lost sales.
#3 - Collect Receivables - You make profit when the check comes in the door not when the sale is made. This Business Basic is often over looked by business owners focused on gross sales or by sales people compensated based on sales rather then collections. If people in your organization get paid for sales, make sure they don’t get paid until you get paid. Invest resources and time in your accounts receivable collection efforts. Get on the phone to collect those stubborn past due accounts. Better yet, check out your customers’ credit before you close the sale.
#4 - Control Costs - With the uncertain economy, controlling costs will be the key to your survival. Avoid the temptation of buying extra inventories at reduced prices. Think twice before expanding into new space or hiring new employees based on expected growth. Err on the side of saying NO instead of yes when making spending decisions. Delay spending as long as possible. Even a few weeks of delaying purchases will help your cash flow and profitability.
#5 - Get your house in order - Make sure your finance and business practices are sharp. Keep your financial information updated so you know where you are. Keep your accountant or bookkeeper on a strict schedule and review your financials constantly. Pay your bills in a timely manner, monitor you bank accounts, and review your payables, contracts, and leases periodically. Keep your business advisors, attorneys, accountants, bankers and financial consultants updated to trends and issues in your business and solicit feedback.
Congratulations on starting on your list of New Year’s resolutions by learning to improve your business and burning about 15 calories in the process.
President, Money $ense
Amy@MoneySenseSolutions.com, 303.494.5362
Amy E. Gibb, President of Money $ense specializes in making businesses more profitable. She may be contacted at 303.494.5362, or for more information go to www.MoneySenseSolutions.com.