Controlling costs is at least as important as increasing revenues. Just because you’re bringing in business doesn’t guarantee that you’re making money.
Pay attention
Here are two rules that will serve you well:
- Keep an expense journal with you at all times and write down everything you spend, every day.
- Tie every business expense to a project. For every $100 you spend, you’ll need to bring in $150 in sales just to break even.
Learn new skills
- Learn the difference between profits and income, between revenues and cash. You can be making sales like crazy and go broke.
- Learn how to create and understand a cash flow analysis.
Read up
Understanding Cash Flow
Small Business Cash Flow
Cash Flow Problem Solver by Bryan E. Milling. This book is out of print but you can find copies on the various used book sites. It gives real-world examples of cash flow problems in small businesses and how to solve them.
Ask for help
You can also get advice from a SCORE volunteer or a paid business advisor.
Learning how to do a cash flow projection isn’t difficult, but it will change the way you think about your business.
{ 4 comments… read them below or add one }
troy 02.10.08 at 6:50 am
I agree that an expense journal is very important. Maintaining one has helped me control costs and also kept me from buying items that I just didn’t really need.
sterling | bizlift 02.17.08 at 3:25 pm
I put all business expenses on a business card that automatically gets entered into Quickbooks Online. But, I like the idea of tying expenses to projects and need to do that.
Thanks for the links to additional info on understanding cash flow. Good stuff.
Mark 03.09.08 at 10:19 pm
Sure thing, Sterling. I just put up another business systems article that has some information you might find useful. And, I’m working on several cash flow articles that go into more detail about how to improve cash flow. Stay tuned! And thanks for reading!
Mark 03.09.08 at 10:21 pm
Troy,
Thanks for the comment. It’s so true that sometimes the simplest actions make life easier. Keeping track of expenses in a small notebook isn’t difficult and actually can save you a ton of money over time. Those $3 lattes add up!