How to Increase Your Bottom Line
With the New Year upon us, it seems like a perfect time to start thinking about how to wrap up 2019 and prepare for 2020. If you haven’t done it already, then it’s time to start looking at your financial statements and determining where you have excelled and where you need improvement. And of course, how to turn those failures into successes in the new year.
Most companies tend to focus on this type of analysis on ways to improve their revenue stream. Can they find new forms of passive income, or maybe ramp up some product or service that they already provide. But we go beyond that, we recommend you start your analysis in an area that you have more control over: your expenses. You may be surprised to find out just exactly where your money is going.
You will want to look at all of your expense areas, but the two areas I think you should take a deeper look at is advertising and recurring charges. Advertising is an area that many businesses find is their biggest expense. However you choose to advertise, it is critical that you frequently analyze the success rate of your marketing strategies. This will allow you to determine if a plan needs to be tweaked or thrown out altogether. You may also find that you have signed up for recurring services/products that you no longer use. Take a look at the monthly, quarterly, and annual recurring charges and confirm that you are in fact using the product or service. Software and apps are two of the biggest expenses found in this area. You might be surprised at the savings you find.
The process starts by going down your Profit and Loss Statement and reviewing each category for vendors and charges that can be eliminated. This is also a good time to ensure that each transaction is properly coded in your system. This will be extremely useful in the future, especially with tax time looming.
If you are using QuickBooks Online (QBO), there are two reports I recommend for this exercise.
1. Transaction List by Vendor -For this report select the date range, January through December 2019. This report allows you to see all expenses for the 12-month period listed out by the vendor. This report can be amazing in determining where all your money went. If you want to do an additional analysis of it, you can export it to Excel. However, good record keeping is crucial here. If you haven’t been entering the vendor names on your transactions, then they won’t show up here. If this is the case for you, then you really should start adding the vendor name to future transactions immediately. This is a necessary step when entering transactions and should not be neglected. Knowing the actual amount of money spent is crucial but knowing exactly where it went is equally important.
2. Profit and Loss by month – For this report select the date range, January through December 2019. This report allows you to see total expense by month for each expense category that is set up in your system. I find it beneficial to prepare it by month in order to perform a monthly comparison for each category. This is a great way to find trends or even errors.
If you don’t have the above reports, you will need to find a different way to access the information. Feel free to contact us for a coaching call to discuss your unique situation and determine the best plan for you. Send us an email at Hello@SensibleBusinessOwner.com to set up the call. We are currently offering a discount on our hourly rates, so act soon! Tax time is just around the corner!
The article is for informational purposes only and should not be construed as business, accounting, tax or legal advice. Details are subject to change without notice.
Copyright © 2018-2020, Brandon & Christi Rains, Rains Group LLC DBA The Sensible Business Owner, ALL RIGHTS RESERVED
RECENT ARTICLES
