Pay attention to where the money comes from for your business.
This article is Part 2 of a 20 part series of business tips from James, Davis, and Associates. These tips are designed to help you do better in business. Be sure to check out each new tip as it is published. If you would rather read all the tips at one time, you may click here to purchase a beautiful e-book containing all twenty tips.
Years ago when I was a young entrepreneur, there was a rap song which had as its hook, the line, “I’ve got my mind on my money and my money on my mind.” The song was a big hit all over the country. It reminded listeners that they must pay attention to their money. The hook is a good idea for entrepreneurs who must pay attention to the money when it comes to their businesses. Entrepreneurs must pay attention to where the money comes from and where it goes when it leaves the business.
Where does the money your business gets come from?
No matter what type of business an entrepreneur has, she must be able to track where the money comes from in her business. An entrepreneur must be able to identify the product lines, customer types, division, sales employees, and any other source of income for the business. When an entrepreneur has a clear understanding of where the money comes from in her business, she is able to make well-informed and well-reasoned business decisions.
Take a moment now and think about where the money comes from for your business. What product line or service generates the most income? Do your customers like the same products or services year around or do their desires change with the seasons? Are your most profitable products or services readily available to meet customer needs?
What does your business spend its money on?
Which product line or service costs you the most to produce for your business? What does your business spend most of its money on? Are you spending money where you get the best return possible? How much do your employees cost the business? If you cannot answer these questions quickly and easily, you do not have enough knowledge about money and your business.
Do you know the cash flow cycles for your business?
Most businesses have a cash flow cycle. There are times when money comes in quickly and easily and times when money comes in only in drips and drops. Does your business have a cyclical cash flow? If it does, do you prepare for the slow periods by stocking up on cash earned during the more flush seasons? Do you make business decisions with cash flow cycles in mind?
Keep your mind on your money and your money on your mind.
Most entrepreneurs are good at doing whatever it is that their business does. Hairstylist are excellent at their art. Lawyers are good at the practice of law. Bakers are good at all things coming from the oven. What business owners often lack is the ability to keep track of the money that comes into and out of their businesses. They lack the ability to create and follow a well thought out business plan. If you do not know how to understand, control, and handle the money that comes into and out of your business, your business will not stand the test of time.
Many professions have continuing education requirements. These requirements make sure that the professionals keep up to date with changes in their industries. When it comes to your money, continue to educate yourself. Keep up to date with changes in taxes, accounting requirements, and fiscal policies that impact your business. If you don’t know, get the knowledge you need. Get all you can, and can all you get.