On day 5 of this journey your assignment was to create ( if you did not have one) a written budget for your business. Today let’s review the budget and look at a few items:
- At the end of this current month, please do a comparison of your actual income and expenses versus your budgeted income and expenses. If your income exceeded your expenses, put the extra money into a reserve operating income account. These funds are not to be touched until you have 6 months of actual operating expenses in the account and then, only the surplus should be used.
- If you are running a deficit for the month, (more expenses then income) then review your income over the past six months and see if there is an upward trend. Next, review your current reserve account (working capital). Based on your projected income growth, do you have enough of a reserve to operate until you reach your projected break even point. If not, then it’s time to increase the reserve account. Borrowing on credit cards is not an answer as not paying your bills, is not an answer. If funds are needed, consider some of these options: your own personal savings, talk to your banker about a small business loan (business plan and documentation may be required), ask family or friends to invest in your company, consider taking in a partner, look for a possible merger, talk to your support group about other possible solutions.
- If you are a new business, the two sentences above apply to your as well. It is very hard to grow a business by taking on more debt and higher monthly payments. Establishing a reserve account is essential.
- Write down which of these situation fits you best, if you need more operating capital, make a list of who you will talk to; prepare your presentation about your future growth and then see the people.
Your final assignment to start on today, is to make a list of 5 things that you can do increase your income. If you have employees, perhaps “brain storming ” session will help. Remember, we always need our staff to buy into our decisions. We will get back to these five items in the next few days.
Living the golden rule results in an enhancement of our present and an investment in our future.
Have a great day!