So you want to get your financials in order but aren’t sure where to start? Here are these three reports you can use to analyze your financials strategically and grow your business. I will start by saying I am not an accountant, so when in doubt, do what your accountant says. These are however the basic financials I need as a Growth Consultant with any client, in any industry, to start discussing scaling their business profitably.

Annual Budget: This is not your financial breakdown of the previous year. This is a financial forecast for the coming 12 months. List out your categories and forecasted budget for the year in the following areas.

  1. Revenue – break out each revenue stream and identify your total revenue target for the year in each area.
  2. Variable costs – these are the costs that increase in direct proportion to your sales increasing. For example, the more tea a coffee shop sells, the more tea bags they need to buy. The variable cost would be the tea bags.
  3. Fixed expenses – those costs not linked to revenue, think of them as sunk costs that you will spend regardless of your sales. For example, the cost of buying a delivery vehicle will be paid whether you sell a lot or a small amount of food in your food delivery business.
  4. Assets – If you paid $6000 for that vehicle and you could resell it at the end of the year for $5000, this would be listed out as well. This asset has profit sitting in it. Only assets purchased in that year will be included here.
  5. Profit – total up these areas and see your profit number. If you don’t like it, start problem-solving! Sure is better to know there is a problem now rather than being surprised at the end of the year. With knowledge of a problem, you have the opportunity to change the outcome.

If you are in doubt on what to forecast, ask the following questions:

  • What was this number last year for me?
  • Was that number enough? Or does it have to increase/decrease this year to hit my goal?
  • What is this number typically in my industry?
  • What do I need this number to be to ensure I hit my goals?

The answer for the accurate forecast is at the crossroads of the answers to these questions. At the end of the day choose a number and go with it, you will learn whether you are right or not quicker than if you sat on the fence.

Monthly Cash Flow: Break your annual budget into a month-by-month view so that you know what your net will be each month. Sometimes a couple negatives month come right before the big payout. You can save yourself a ton of stress by just knowing that it will happen and how long it will last.

Expense Tracking: Budgets are only useful if you follow them. Whether you have an online program like Xero or Quickbooks or a simple excel sheet; you must track how much money you spend and consistently compare it to the budget.

Put these three reports together and you will know your financial reality so that you have the chance pre-emptively to influence the result. After all that work, you still aren’t done….It’s not about DOING your financials, it’s about ANALYZING them for more information. Look at your numbers for an hour and see what you learn about how you can improve your business.

Nicole Gallop is a VP at Cultivate. As a strategic planner, Nicole is unafraid to push boundaries to achieve goals. Her passion is optimizing the potential for both you and your business. She operates with an intense focus on bringing the right people into a highly collaborative, positive and result-oriented environment.