Modern CEOs – How to Stop Overcomplicating Money in Your Business

by | Jan 8, 2021 | Blog, Right On Time Podcast

Hey, hey, Modern CEO. We have a tendency as humans, really, it's not unique to us as Modern CEOs, we have a tendency to over complicate things.

Anybody feel me? Anybody else experience this?

Well, one of the things, one of the areas that I wanna help us streamline things a little bit is related to our numbers. Because it's incredibly important that we look closely at our numbers and we look closely at our financials as we are growing our businesses.

When I am making a change in the business or we're going through a season of growth and we're employing new strategies and new tactics, or we're seeing unexpected things happen, I'm looking at my budget daily. I'm looking at my financials daily. I'm looking at what's coming in and what's going out daily. This applies on a personal note as well.

When we are moving, right, when we're in a move season for my family, I'm looking at my numbers daily. We've got more expenses. We've got different expenses coming in and coming out. So I'm looking at those differently than I am when I am in a routine maintenance mode.

So you might look at your numbers differently at different seasons, right? So it's okay if sometimes you're looking at those things daily and other times you're looking at them every week on a Friday, right?

So typically, I look at the numbers weekly on a Friday. I do deeper dives twice a month, and then monthly, I do a full financial review. And twice a year I do a massive deep dive. I do calculations, I do forecasts, I really get into a lot of spreadsheets.

Just a couple weeks ago on our year-end break, I was building out calculation after calculation after calculation to do some planning and strategizing and some modeling in my head. You don't have to do that every week.

To keep it simple, if you wanna look at your profit, what you need to do is look at what's coming in, what are the expenses that you have, and that'll give you your profit numbers. So what's coming in, revenue, and what your expenses are, and that gets you to your profit margin.

Profit margin is simply the percentage of profit out of your revenue.

So let's say you do 100,000 in sales and 10,000 of that is profit, because 90,000 is expenses, well, 10,000 is profit, profit dollars, and 10% is your profit margin, the percentage, okay?

So if you wanna track and look at your profitability this year more closely, because maybe the last few years, you've been investing more and more in your business, maybe you've got a goal to track your profitability this year, because maybe the last few years, you've been investing more back into your business, you haven't had great profit margins. But this is the year you wanna dial it up and get profitable, so you're gonna track profitability.

What we have goals around, we wanna track, we wanna look at more carefully, we wanna measure. Because what gets measured gets done, gets our focus, gets our attention. So we're gonna focus on that profitability number.

So you're gonna wanna look at your expenses more closely and you're gonna wanna look at what's coming in, your revenue, more closely. Not what you sell, because the sales number doesn't necessarily mean that that's a collected payment.

A collected payment is when that sale turns into actual revenue, right? So we're looking at revenue. So you could do that in a bookkeeping system.

But a client recently asked me, “Hey, I've got my bookkeeping system, but my bookkeeper, I'm set up on a routine where they only update once a month or they only update once a quarter.”

Totally cool. I tracked my financials in a spreadsheet for years. And even when I worked in corporate, yeah, we had all these fancy systems, but when I sat down with finance, we were looking at the business numbers, guess what we were looking at?

So many times, we were going right back to a spreadsheet. So it's totally okay to also augment your money reviews in a simple tool, a spreadsheet if that works for you, Airtable if you prefer Airtable, pen and paper, a chart on the wall if that works for you, if you're tracking your sales on the wall.

Whatever works, rock and roll with it.

Then, what you're gonna do is you're gonna look at, what's my incoming revenue?

And if you're in a season of growth, if you're building momentum, if you're in a season of change, I'd look at that revenue every single day.

It's gonna give you momentum to see those sales come in when you're testing out a new offer.

I felt that just over the holiday season. We were testing out a new channel for reaching new clients, and every time a sale come in, whoa, we were doing that happy dance.

Small business owners do a happy dance. We see your name.

So we're doing the happy dance every single time a sale came in because we were so happy to connect with that client, that customer. So then, you could also track the expenses individually.

If you have so many expenses in your business that you can't track these in a spreadsheet, I wanna look at that. We are small businesses.

We're not gonna have Starbucks transaction five times a day. We're not gonna have a lot of one-off stuff. We've got subscriptions to run our businesses. We've got consulting investments that we're making. We should have a smaller number of transactions that we can easily have our eyes on and we should know what those are, right?

What I do when I was tracking all those in a spreadsheet for years in my business, you can just download those once a week from your banking system. Download those once a week from your PayPal system if they're coming through your expenses or running through PayPal. Wherever your expenses are running through, just go in, take a peek, grab those from your expense system and put them wherever you're going to track.

Again, Excel spreadsheet, Airtable, piece of paper, chart on your wall, whatever that is. And then again, you can look, if you're tracking profitability what's my revenue versus my expenses?

Now day-to-day, I wouldn't necessarily track profitability because these are things that are gonna ebb and flow, right? They're gonna ebb and flow throughout the week, throughout the month. But having your eyes on this is gonna fuel you and give you so much more awareness around your financials.

So again, if you're in a growth season, if things are changing for you, you wanna look at these more frequently. Otherwise, you can look at them on another set cadence.

I do weekly financial reviews just to make sure everything's buttoned up and in place. I do a more comprehensive review biweekly on the 15th and the 30th of every month, and then on the 30th, I go a little bit deeper, got a few more things on my checklist that I do monthly. And then, of course, those two times a year, I go really deep and do significant planning.

So I hope this is helpful for you as you think about your numbers and you think about what you're going to manage and pay attention to in terms of your financials in the year ahead.

You are right on time if you're just starting to look at your numbers right now.

There's no time like the present. Happy numbers watching. Let's see them grow.

 

Highlights:

[00:26] “It’s incredibly important that we look closely at our numbers and we look closely at our financials as we are growing our businesses.”

[00:48] “Take a look at your financials daily — what's coming in and what's coming out”

[01:13] “You might look at your numbers differently at different seasons.”

[01:57] Strategy on how to determine and manage your profit

[02:20] What is a profit margin

[02:45] How to track your profitability for the year 2021

[03:13] “What gets measured, gets done. Gets our focus. Gets our attention.”

[03:31] Difference between the sales number and revenue

[04:19] Ways to augment your money review using simple tools

[04:41] How looking at your revenue provides momentum

[05:02] “Everytime a sale comes, we're doing the happy dance.”

[05:19] Should you track your expenses individually?

[06:39] “Having your eyes on this is gonna fuel you and give you so much more awareness around your financials.”

[06:55] When to do your financial review

Hi, I’m amber!

Eternal optimist, lover of dance parties, here to get more of you in the world and help you grow your dream business.

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