Whether you operate on a calendar year or financial year, June is the perfect time to stop and review what’s happening in your business. It’s either the mid-point of your year, or the end.
Reviewing your financial performance is as important as creating a budget. Because without the comparison, there is no opportunity for further growth!
Besides being a great motivator for planning to kick your financial goals, it can provide you with a solid base to make decisions about the future direction and focus of your business.
The review process is great for getting you back on track or finding ways to do things differently, especially those businesses that have been impacted by external environmental factors.
So, let’s get stuck into how to go about reviewing your financials this month, in order to set you and your business up for success.
1. What was your budget?
Grab your budget and let’s make some quick comparisons. If you don’t have a budget, that’s ok. Write down the revenue and profit number you expected to have earnt by now.
If you’re keen to prepare a budget for the next 6 or 12 months, check out this blog which gives you all the steps you need.
2. Make the comparison
What is the difference between what you expected and what actually happened? Is it more or less? Make sure that you write it down!
3. Determine what caused the difference
There are three main variables that can help you explain the difference and help you understand where you need to put your focus for the next few months. Use the questions below as prompts to work out what caused the difference in your expected and actual figures.
- Price – Did you need to reduce the price of your goods or services due to economic conditions? Did you plan on having a sale or launch but had to postpone? Do you need to increase your prices?
- Quantity – Was there a reduced or increased demand in the market? Is there anything you can do to stimulate an increase in demand? How can you take advantage of an increase in demand? Did you sell more of your lower cost product or services than your higher priced ones?
- Expenses – Did you keep expenses in check in line with your sales? Are there expenses for things your business no longer really needs?
This is your opportunity to get back on track! List three actions you can take to reach your goals. Think about whether you could:
- Change your marketing focus
- Increase your prices
- Change suppliers
- Remove some expenses
- Change your product/service mix
- Find a collaborative partner
- Add complementary products or services to your offering
Redo your budget or reset your goals based on this exercise. The most important piece of this puzzle is making sure that it’s achievable. By all means stretch yourself, but if the numbers are not in line with your values or how much time you have available to devote to your business, then it’s never going to work! If need be, give yourself some time to emotionally recover and make sure that you celebrate all the successes (no matter how big or small) you’ve made so far.
If you’re looking at ways you can improve your financial position, then my 5 Pillar Financial Audit can help you quickly and easily identify opportunities for promotion, changing your product mix, pricing and potential savings. Sign up here for 50% off or send me an email.
You can also download this free profit and growth planner which is designed for those that don’t love with financials or tech. An easy to use Excel spreadsheet that will have you planning like a pro in no time!