At the beginning of each new year, I like to set realistic and achievable, yet stretching, targets. They are broken down by quarter, and then I monitor and tweak them throughout the year. At the end of each quarter, I reassess my progress and adjust the targets as necessary. This is an important strategy to put in place to ensure my business is heading in the right direction and achieving what I set out to do.
Before I decide on my goals each year, I review what happened in the previous year and ask myself questions such as: Did we reach the targets set? Were the goals stretching enough? and What did we learn from monitoring this information? Since implementing this strategy in my own business over a year ago, I have made good business decisions because of the insight I get from analysing the financial data.
What type of financial data should you be looking at? It is equally important to keep a close eye on your profit and cash flow. A business cannot survive without both elements being in good health. To do this you need accurate and timely bookkeeping, ideally completed on accountancy software. When the bookkeeping has been completed for the previous month, you can run a profit and loss report and a cash flow report. Most modern accountancy software has this function.
The best way to gain a deep understanding of how and what has impacted your business finances, both positively and negatively, is to compare last month’s figures with the prior month and also that same month in the previous year. This process will enable you to think about what has happened in the business to create the differences. It will show what has gone well and what didn’t go as well as you may have wanted. When you have this deeper understanding of your business finances, it gives you the knowledge and ability to make much better decisions.
What are your business goals for 2023? If you don’t have a good bookkeeping system, this could be the year to introduce one. It is important to set goals, but you must consistently monitor progress otherwise you are unlikely to reach the targets that have been set. You can monitor progress only when you have a good bookkeeping system in place.
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