Do you understand the financial wellbeing of your business inside and out? If the answer is a resounding “no,” you’re not alone.
After all, there are millions of moving pieces to any given business; however, your financial status should be a top priority regardless of your industry.
Thankfully, keeping your cash flow in check doesn’t have to be a massive headache. Instead, consider the following six questions as a starting point to assess your wealth. While you may want to shy away from some of these questions, answering them can reveal what you need to focus on financially.
What Do We Have in the Bank Right Now?
First and foremost, you should always have a pulse on your current revenue, projections and how much you have in your safety fund. This rings true in your personal and professional life as you look to prevent a potential financial emergency.
Could We Survive an Audit?
Audits of any scope require us to be both prepared and vigilant, especially an external audit. For example, Reciprocity Labs outlines the specifics for surviving an SOC audit and the attention to detail that any given audit requires. While audits are part of running a bigger business, understanding the fine details of one can take some major stress off your shoulders.
How Much Can We Afford to Lose?
Looking to explore a new marketing channel? Launch a new product? Assessing risks versus rewards is a critical component of managing your money. With any new venture comes the potential losses, so don’t spend anything that you can’t afford to lose long-term.
How Diverse Are Our Revenue Streams?
As the old saying goes, don’t put all of your eggs into one basket.
Diversifying your revenue streams is sound advice for any business. For example, a combination of selling your time the form of services, providing a physical or digital product and earning passive income from affiliates is a brilliant combination for online businesses today. Remember: it always pays to have a backup when one stream stops flowing.
How Are We Determine Employee Pay?
While you should strive to pay your workers a fair wage, make sure that your basis of salary makes financial sense. Determining how much you should pay your employees depends on a variety of factors including their roles, relevant experience and ultimately what they bring to the table. It may take some time to find a balance between what makes your employees happy, but finding that balance is important to retaining your top talent.
Where Can We Start Cutting Corners?
Eliminating waste is a must-do for the long-term survival of your business. Whether it’s getting rid of a role that isn’t producing an ROI, cutting down on paid marketing channels or going remote, don’t neglect the need to downsize from time to time. Assuming that “bigger is better” is a dangerous game, especially if you want to run a lean company.
Having the answers to these questions handy helps guarantee that you’re running a smart business that’s financially sound. With your company’s finances in order, you never have to second-guess yourself: that means getting down to business with confidence.