I run a pretty lean business — meaning lower expenses, higher profit margins! I’m proud of that. That’s a PRO of online business, we can be lean! However, so often we overspend without even thinking about it. It’s easy to just spend, spend, spend! Shiny object syndrome is real. And most of us (myself included) did not study finance, accounting, and bookkeeping in any professional capacity. We might struggle to really SEE where our money is going.
As you move into the new year, it’s the perfect time to evaluate what’s been happening in your business financially and see what shifts you can make to improve your finances and increase your profit! Let’s look critically at our business’ finances today to see what shifts we can make to increase our profit margins! I am going to show you 4 areas to evaluate in your business finances to get your profits higher and spending lower for the new year!
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1. Evaluate all of your recurring bills and subscriptions.
The first step to increase your profit is to look at what you are paying out monthly. Start by looking at your subscriptions and recurring payments. Get out your bookkeeping reports for your business and see what you are paying for each month. Sometimes we get so used to the “little expenses” here and there that we miss the big picture that yes maybe the subscription is just $15/month, but you spent $180 on it over the whole year!
If you use QuickBooks, you can easily see the full picture of what you spend on things by going to “expenses by vendor summary”. There are other ways to view this too but this is the summary I use.
Ask yourself these questions:
- Can you move down a tier on any of these?
- Is there something you don’t use anymore that you can cancel?
- If there are deals that you can re-up with?
- Is there a company that you could reach out to and ASK for a better rate?
People do this all the time with things like internet services. Is there something on this list you could do that with?
I recently canceled a membership I was a part of because I realized I hadn’t used it in 3 months. And I kept telling myself “I will soon!”, but I never did. By canceling it when I wasn’t using it, I saved over $1000 in the next 12 months.
Look for areas you can get leaner in the business by canceling or lowering a tier.
Make notes of all of this, and then when you’re done going through these steps - you can go back and cancel or change subscriptions.
2. Now time to look at the subscriptions you will definitely keep!
Now that you have found the subscriptions you don’t really need, take a look at the ones you know you want to keep. Consider switching to a yearly subscription to save money.
With things like Showit and Dubsado, you can save on a yearly subscription! Saving money where you can, helps you increase your profit. Make note of those companies that you will certainly not be parting ways with, and then figure out if they have yearly subscription plans that will save you money. Also, consider that many of these companies might even be running a promotion for the new year that you can swipe!
3. Find your highest expense on the profit and loss statement.
*This excludes paying yourself.
Ask yourself these questions:
- Do you need it?
- Can you reduce it?
- What’s the ROI on it?
So often we have these monthly expenses or one-time-a-year expenses that we don’t really notice or consider whether or not we need it. This is an important question to ask because you need to know where the majority of your money is going! You should be able to answer that question. Also, it is really hard to evaluate these things without the data.
If you don’t love numbers and spreadsheets, this kind of evaluation often isn’t fun and we want to skip it for the less mundane parts of our business. DON’T DO THAT! This matters big time.
4. Evaluate the way you are managing your business’ money.
There is no better time of year to change up your business finances than right before the new year. It is the cleanest time! You can start fresh with a new system on January 1st. Here are some things you might want to consider switching out or adding in:
- Do you need to start using bookkeeping software like QuickBooks?
- Do you need a new spreadsheet system for tracking income and expenses like Profit Sheet?
- Time for a bookkeeper on your monthly expenses?
- Is it time to accept payments in a more professional way? [Listen to episode #88 for more on what it means to accept payments professionally and why you shouldn’t use personal apps like Venmo or CashApp for your business.]
I hope this episode has given you a great place to start if you want to increase your profit in the new year and tips on how to evaluate your business finances. So, cancel the subscriptions you don’t use, ask for a better rate from that company that came to your mind, scale back on what’s not giving you a return. By doing this process, you are setting yourself up for a beautiful financial start to 2022!
Think you want more financial tools to track this kind of stuff? Check out my resource, Profit Sheet! This is the tool I created and have used for years to track my business finances. You can track everything from tax payments, to what you pay yourself monthly, profit margins, and so much more!
November 30, 2021
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