We’re heading into winter, and do you know what that means?

June is the month where people usually prepare for the end of the financial year, but it’s also a great time to assess the old and prepare for the new. And sometimes, the best way forward is to start by looking back.

I touched on financial levers last time and, for a small business, they can really make or break your sanity or become one of the most stressful things if you’re not watching them. In saying that, cash flow levers are one of the biggest tools in your bag of tricks that aren’t that scary and don’t involve making a massive change. Sometimes the biggest differentiators you can action are to make smaller changes over time.

So, before you go creating new products or pricing strategies, there are a few other levers you can check first in order to assess your overall profitability. Now I can recite a financial textbook here, but I’m not an accountant and this is not considered financial advice. Instead, I’m going to go over things that, as a small business owner, I’ve seen work and work for me.

Step 1 – Have fast access to your financials.

A.k.a. your profit and loss report for the year. Having access to up-to-date numbers and making quick decisions is the key to increasing profitability. And that key starts with you – if you can’t spend an hour a week looking at your numbers then it’s going to be real hard to increase profitability. That’s definitely a choice you’re free to make, but it is costing you.

Step 2 – But I don't have my financials done.

Make sure your numbers are up-to-date so you can look at your profit and loss report.

Step 3 – Do I have to?

If you don’t have it and don’t want to do one up, hire a bookkeeper/accountant.

Step 4 – Know where your money is going.

Start by reviewing all unnecessary direct debits, an easy place to start saving money. Do you have a rogue Netflix subscription that you put on your business card that one time? This is where you face the music and add up all those morning coffees that you put on your business card. Track your discretionary spending and look for better deals. On the other end of the supply chain, know what type of customer you are. Are you building loyalty with your suppliers? In this economic climate, loyalty can build a better outcome for you than just chasing after the cheapest prices.

Step 5 – Spend money to make money.

But control when it leaves your account. Review your suppliers list because cash in king in a small business. You can increase your capacity to grow revenue by having conversations about other ways to bring value to your suppliers. Sometimes a dollar saved now will hurt you more in the long run and relationships will go further for you.

Step 6 – Review terms with customers.

Do you know what your average invoice processing time is? A good customer who never pays is still not good for business. Decide who you want to work with – it’s not profitable to have a large order if it takes a customer 3 months to pay it. Know what kinds of people your customers are and consider if you want to continue that relationship.

Step 7 – Do a little digging of your own.

When was the last time you check your profit margins on a unit basis? Have your overheads crept up? Do you need to review your unit prices to match?

Step 8 – Know your goal, know your numbers.

Money’s great, but we’re all motivated by other things. I can sit here telling you how to run your business like Scrooge McDuck, but it won’t make you happy (Or it might. If it does, please do not interact). So what’s your goal? And this links back to the beginning, because to know your goal, you need to know your numbers.

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