A Periodic assessment of your business is equally essential as anything. You go to your doctor to get a routine check-up, and you take your car to a mechanic to keep it in good condition. In the same way, you need to conduct a routine check-up of your business to ensure it is growing as per your expectations.
Whether you have a start-up or a well-established business, experts suggest that you should run a yearly assessment of your business. This will let you get an insight into a true picture of your financial condition.
Some entrepreneurs think that the purpose of this periodic assessment is to ensure you are having enough cash coming in.However, it involves a lot of things you need to pay attention to. Here is what the annual assessment of your business includes.
Compare your revenues with set goals.
In order to keep your growing graph up, you need to make sure that you are achieving your revenue goals. As an entrepreneur, you will have to set a business budget that identifies the areas of improvement to achieve your goals.
It will serve as a benchmark to make better decisions for the better growth of your business. At the end of the year, you should see how much revenue you earned and whether it was sufficient compared to your set goals.
It is a good sign if you have earned more money than you anticipated. If so, you should find out the reasons why it happened and whether you will be able to do it down the road. If you have earned surplus cash, make sure that you transfer that money to theemergency cushion.
Diversify your revenues to know the source of income. You must know how much of your income comes from which source. If that amounts to a larger proportion, find out whether it is going to pose a serious threat to your business.
Make sure that this will continue to generate income for your business and you have a backup in case things are turned upside down. Revenue assessment also includes finding how non-revenue generating tasks impacted your revenues.
If this does not affect you much, you can let it go. However, if you notice a huge difference, you should find out the alternatives.For instance, you can outsource some activities, so you can focus on your core activities.
Next thing, you need to analyze whether your customer base added in more clients or it was due to a sudden surge in demand by current customers. Of course, you will have to increase your clientele to keep growing. Determine how you can do it. In a nutshell, the revenue assessment will throw light on:
- Whether the number of your customers increased or the demand for your products and services increased in your current audience.
- Do you need to outsource some of the activities so you can focus on marketing to increase revenues?
- Which source is majorly accountable for high revenues?
Review your business expenses
It is crucial to focus on revenues, but you cannot be sure to see the significant improvement without looking over your business expenses. You are still in the same situation, in fact, a poorer situation if your revenues are growing but expenses are also growing double and triple.
To begin with, you should take a look at your profit and loss statement of previous years to figure out if business expenses have been growing rapidly. Your expenses have a direct impact on your revenues and therefore you should be extra careful about them.
Think if there is enough scope for cutting back on expenses. The lower the cost, the higher the revenues will be. Take stock of recurring expenses. There are some recurring expenses you cannot control, for instance, loan payments, but there are a lot of other expenses you can whittle down.
Software subscriptions, utilities, and other business-associated expenses must be taken into account. For instance, a subscription for services you are not using may cost you an arm and a leg over time.
This can also affect your ability to pay down your debts like loans for the unemployed with bad credit. If you have a start-up, it becomes more important to take control of your expenses.
Look over receivables
It refers to the money your customers owe for goods and services you have already provided to them. The more the account receivables, the worse it is.
If you do not have money coming in, you cannot keep your business running. It is not surprising that sometimes businesses have receivables 90 days past the due date, and this majorly happens with start-ups.
This is because they, in order to build a good relationship with customers, do not chase for payments. Note that business cannot be driven by emotions. You can avoid having your money stuck like it by shortening the payment term.
If you allow your customers to pay within a month, reduce it to a period of two weeks with an additional week for follow-ups and then start charging late payment fees. Do not put off the follow-up calls.
Keep sending them emails and emails if they do not pick up your calls. If your customers are not turning to your messages and notifications, you should inform them from now onwards.They will be liable to pay late payment fees.
Try to give an incentive to customers to pay before time. If they get certain benefits by paying before the due date, they will be more motivated and encouraged to do so. As a result, you will see a significant improvement.
Do not miss out on account payables.
Like account receivables, it is paramount to manage payables because otherwise, you can end up paying late payment charges and losing your reputation. In fact, you can lose your suppliers. Make sure that you pay to them on time.
This will not only help you maintain a good relationship with them, but it will help you stop your money going on interest and late fees. Evaluate your balance sheet to see if you paid any late fees last year.
You need to identify the reason even if you are paying down a small chunk of your money in late payment fees. It can create a huge obstruction in your business operations.
Try to have a calendar and mark dates when you are to pay off your credit card bill and to your suppliers. A cash shortage may also be the cause. Make strategies so you can get themoney paid from your customers.
Take a look at your assets.
Make sure you review the list of assets at the end of the year, so it includes all new assets. Otherwise, you can miss out on depreciation benefits on income tax.
Remove all your old assets that are no longer in use or that have been scrapped from the balance sheet. Otherwise, you will have a misrepresentation of your true financial condition. Check that all your assets are in good condition.
They play an imperative role in running your business. If they are worn out, your business will definitely fail in the middle.
All assets that have a direct or indirect contribution to the growth of your business should be kept in good condition. If any of your assets need maintenance, get it done as soon as possible.
Your good will is also an asset, in fact, the greatest asset, of your company. Although it cannot show up in your balance sheet, you cannot ignore it under any circumstances.
In this day and age, it is your goodwill that will decide whether your customer base will increase, whether your business will generate higher revenuesand whether you will be able to keep growing down the line.
Reputation is a must if you want to streak ahead. You should check online reviews and social media sites to know what people are talking about you and your products and services. If you find that people are doing negative publicity, nip it into the bud right away.
Sometimes customers do not complain even if they are not satisfied with your products and services. Provide after-sale service to your users and ask for feedback. If they express their concerns, try to mitigate their loss by offering something good.
Be careful about your online security.
It is crucial to keep your customers’ data safe online. The cases of online theft and data breach are rapidly rising. Use software that follows strict encryption rules. Use antivirus and antimalware software to avoid losing your data.
Make sure that your software receives auto-updates. Theupdate is a must to have software running properly. Restrict access to files by setting up a password system. Use a different password for each file. Tell your employees not to click a suspicious link.
An annual business assessment is extremely crucial to see your business is growing. If your business fails to generate profits, you will not be able to meet even your personal needs. Your business must be in sound condition so you can meet all of your business requirements. However, sometimes you may still need to borrow money. In that situation, you can take out a loan with a reputed online lender like AoneFinance.
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