With the start of the new year, it’s the perfect time for business owners to take steps towards profitability. Is your company on the right path to profits?
The first step is to consider your business objectives for the near term and long term. Maybe you want to add staff, lease more space, purchase equipment, or give yourself a raise. Is your current operation aligned with those objectives? What isn’t working anymore and what can you trim away to improve profitability?
Here are some additional steps to take to gain actionable insights into your business:
- Evaluate your financials – As you review your financial statements, assess your ratios. Determine whether you are spending more than you’re making, and therefore, curtailing potential net profit.
- Budget vs. actual income/expense – Budgets are excellent road maps for financial planning. Are you hitting your budgeted income? Are you spending more than anticipated? Take this time to assess if your income and expenses match up with your annual budget, and determine the steps you can take now to address any issues.
- Cash flow – Is your business operating with sustainable cash flow to take you through seasonal fluctuations? Do you have the cash you need to add employees, expand your space, or other activities that support growth?
- Revenue centers vs. cost centers – Which part of your operation is really making the money and what’s costing you too much? What should you cut away to streamline and boost profitability?
- Review your policies & procedures – Are your current policies and procedures in line with the direction your business has taken or in tune with plans for growth? What you implemented during your startup phase might not be aligned with your organization’s new path. Cut out what no longer serves your company and update as needed.
- Interview your employees – Chances are, as your business has evolved, so have your staffing needs and the roles your employees are filling. Talk to them to see how they feel about their roles and responsibilities, and make sure their own professional goals are aligned with your objectives as the business owner. Is everyone engaged with your company and customers? Are they all on board with where you want to take the business? If not, it’s time to make some cuts.
Working with an outsourced CFO like CFO Your Way can help you gain clarity around your financials, set smart business goals, identify where to trim the fat in your company and put your business on the path to profitability in 2019. If you’re ready to get those first steps—or need guidance if you’re further down the path—contact Cheryl Mucha, CPA, at firstname.lastname@example.org.