Page 114 - The Magic of Tiny Business
P. 114
Chapter Six Tiny Business Is Lean Business
“Brush your teeth, do the dishes, keep
your accounting current.4
”
It is so important to have your books in order with
every transaction put into the right account—how else can
you know where you have been and where you are going?
In the next section, I’ll explain why knowing those two
things is so important.
Forecasting and Financial Reports:
Where Have You Been? Where Are You Going?
Comparing your current financial results against past
years is interesting to track, but it’s not good enough. Prior
to each new year, you need to put together a monthly plan
of where you see yourself going. The best way to do this is
to lay out a projected monthly income statement (often
called a pro forma) and have a line for every revenue and
expense that you track in your accounting system.
Next, you need to measure what actually happens each
month against your forecast. If you see that the numbers are
not as rosy as your forecast, do something! Find out why
your sales are lower, or your cost of goods is higher, or your
utility bill is sky high. It may just be timing or it may be a
problem. And if it’s a problem, keeping check on a monthly
basis will allow you to take action before it becomes an even
bigger, possibly insurmountable problem.
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