How Much Do I Need to Save to Get Through the Tight Months?
It’s an inescapable fact – there will be tight financial times. All industries experience cyclical movements, with busy and slow periods. There’s simply no way around it, regardless of the industry in which you’re working. Part of being a successful business owner is the understanding when those periods are likely to occur and saving money to get you through. How do you do this?
It all starts with a strategic analysis of your company’s situations and financial needs. From bookkeeping habits to the profit margin on each product and service, a strategic analysis can offer invaluable insight and knowledge.
The first step you will need to take is to conduct a review of a full year of financial statements. This will give you vital information about sales and profits over the course of a 12-month period, indicating which months will be most likely to see slower sales and which months might see an excess. After the review, you’ll need to estimate change going into the next (or current) year and project sales figures for each month. You may want to evaluate and save for seasonality and to be on a more economical conservative route maintain at least six weeks’ worth of payroll in your bank. Be sure that you save for growth investments, such as hiring of new employees. All of these can be budgeted in your bookkeeping and careful examination of your profit margin.
Conducting a strategic analysis like this can be difficult and time consuming. After all, you are a business owner, not a financial expert. Thankfully, there is a way that you can still take advantage of having a strategic analysis to predict when lean months will happen. Hiring a financial consultant will ensure that you have an experienced, expert partner who can drill down through your previous year’s financial statements. He or she will look over your bookkeeping, examine your profit margin on products/services and make an accurate prediction of not just when slow times might occur, but how much money you’ll need to save in order to make it through those periods unscathed.
About the Author Barb Fisher
Barb is the CEO of Fisher Bookkeeping, an outsourced bookkeeping consultancy that provides small businesses with a full-service financial department. Her favorite aspect of work is to break down the accounting to meaningful bits, so entrepreneurs can make a powerful difference in their own business. She's also a power lifter (squat: 215, DL: 270).