The washer fluid light on my dash just lit up and I thought of you!
Okay – let me try to make that make sense… It’s been getting colder here in MA, and I admit when I just can’t bear to stand outside and scrape, I coat the windshield with wiper fluid, crank up the defrost and melt-wipe the ice away. So of course, the “Low Washer Fluid” alert dings and the light comes on more often than usual. And I think, well that’s good to know, time to fill ‘er back up.
For the exact same reason, businesses need to regularly glance down at their books. Because there could be some very important lights lighting up in your numbers.
For instance, how full is your gas tank? Current Ratio is one super-basic indication of the financial health of your business.
Current Ratio = Current Assets divided by Current Liabilities.
If your current assets are $250,000 and your current liabilities are $100,000, your current ratio is 2.5. It’s going to vary industry by industry but generally if your ratio falls between 1.5 and 3, you’re well set to pay your bills. If your ratio is below 1 then you might feel weighed down under a pile of debt.
What kind of mileage is your business getting?
A look at your Profit and Loss Statement will give you a macro idea of how far your business can travel at your current speed. Are you seeing consistent, even revenues that generate a profit? Or are you slowly running out of money? Can you spot spikes in your earnings or expenses that you can smooth out? Or maybe you don’t need to smooth them out, maybe you run your business from launch to launch and you just need to be prepared for the fast-slow & high-lows of your business model.
Are your accounts low on oil?
Letting invoices go unpaid and accounts receivables pile up is more common than you think. But no joke, your business will seize up without oil in the tank. If it helps, automate sending out reminders so your clients and customers can’t forget that they owe you your money!
Check your alignment.
Look at your sales by product, service and income stream. Review, at least quarterly, where your revenues are coming from and why. This gives you hard data to help decide what to continue, release or put more effort into.
I worked with an estate attorney client who normally earned about 10% of her monthly revenue in probate work. Suddenly, one month her revenue from probate work was up over 30%! Seeing that number ‘light up’ prompted us to look more closely at whether this was a growth opportunity that she could be promoting more aggressively. For this client, probate work turned out to be a less-profitable service and she didn’t really love doing that work. So what appeared to be a growth opportunity on the surface was not one she wanted to pursue! She made a conscious, well-informed decision about where to focus her marketing after this ‘blip’ happened.
Watching your business ‘dashboard’, i.e., the numbers, provides frequent opportunities to see how well things are going, and also catch any alerts that make you go “whoa, what happened there??”
Just like with driving, you can’t stare down at the dash constantly. Obviously your eyes should be on the open road ahead. But glance down at the dash every now and then to make sure your business is running smoothly. Trust me – it really helps you enjoy the ride.
I’m happy to give you some insight on what you should be watching, and the kind of decisions hard data can help. Book a complimentary Keep More Money Strategy Call here.
Drive safely! And don’t forget the washer fluid
