Many business owners by now know what their revenue goals are for 2022 but many have not spent the time to map out the path to accomplish those goals. Here are three (3) things you should have in place that will help drive financial success in your business in 2022.
- Create Your Financial Forecast – a financial forecast is a financial plan that estimates the company’s revenue as well as expenses in detail. It should project out what you want your income statement to look like for a specified period. For our business and for our client’s business that we do financial forecasts for, we create a 3-year financial forecast with year one broken down by month. For example, if we are forecasting revenue of $1,000,000 for 2022, we would then break down what income streams are going to make up that $1 million and how much each income stream will be bringing in each month, January through December. Let us say the company has four (4) revenue streams, the easy route would be to say each revenue stream will bring in $250,000 each and then divide that $250K by twelve (12) and decide that each stream would bring in $20,834 each month. However, that may not be an accurate forecast. As an accounting firm, our heaviest months as it relates to our tax income are February through April and then again September and October. Therefore, it would not be accurate for me to split our tax revenue equally each month of the year; seasonality and other factors need to be considered.
- Track Actuals Against Forecast – knowing your numbers is key to running a successful business. Creating a forecast and then not implementing a timely and accurate system of obtaining your actual financial data to compare to your forecast is not wise. Reviewing your data monthly or even more frequently gives you as the business owner more clarity and confidence to make business decisions that would drive growth and profitability. You want to be able to ask yourself questions like: (i) Am I meeting my projected numbers? (ii) If so, what is contributing to that? Let us do more of that. (iii) If not, why not? What do we need to tweak or change? (iv) Which expenses should we keep (necessary and at the appropriate cost), reduce (necessary but cost should be reduced by negotiating or price shopping), or eliminate (not necessary and too costly)?
- Prioritize Your Pay & Your Profits – many business owners lead with expenses rather than paying themselves and taking profits first. However, paying yourself first is an added incentive to keep working towards the success of your business. When investors and banks see that you as an owner is paying yourself, they are more likely to provide the necessary financing that you need because they view you as committed. Having profits set aside in their business gives business owners peace of mind as it provides a cushion for future business needs. Therefore, business owners should implement a cash management system, such as Profit First, that will help them compensate themselves for their hard work and run a more profitable business.
When you have these things in place early in the year, the greater the likelihood of your financial success in your business. Make 2022 your best financial year yet by getting the financial team and support in place that will support your growth and profitability. We would love to support you. Click here to book a consultation today.