Gain Financial Control of Your Business: 3 Things You Should Know

As small business owners, it's important to understand the financial health of your business. One way to do this is by closely looking at the documents that reflect how your company is doing financially, such as a break-even analysis and your profit and loss statement.

Through these reports, you can determine whether or not you are making money and identify areas where you can make improvements to increase profitability. This is a crucial assessment that requires special attention to ensure the profitability of your business.

Most businesses have a CFO or outsource their strategic planning to a company that offers CFO services. However, if you're not ready to pay for CFO consulting services, here are some key areas to pay close attention to when looking to grow your business and pay yourself more.

Break-even Analysis

When analyzing your break-even point, look at both your fixed costs (such as rent/mortgage payments) and variable costs (such as cost of goods sold). Compare what it costs to produce each product with how much revenue they generate to determine which ones are most profitable. Make adjustments accordingly if necessary – for example, raise prices on highly profitable products, or decrease costs on low-margin items.

Profit and Loss Statement (P&L)

Your P&L statement shows your total revenue, expenses, and net income at a particular point in time. Be sure to look closely at both your operating expenses (which are related to day-to-day operations) and capital expenditures (which are long-term investments). This will give you an idea of what’s driving your profits and losses each month. Additionally, compare the results from previous months or quarters to get an idea of how your business is trending over time.

Paying Yourself

That are different ways of paying yourself, whether you're set up on payroll or though guaranteed payments as an owner of the business. It's important to have the right payment structure set up to avoid tax complications. If you're not sure how to pay yourself, make sure to consult with an accountant.

Once you know how you're receiving money from your business, set up a budget. Much similar to payroll, you need to be part of the withdrawals too. Knowing your break-even point and P&L statement will make it easier to know exactly how to increase your pay and bonuses.

Gain Financial Control of Your Business

By understanding which products are more profitable, analyzing your P&L statement regularly, and having a proper payment structure set up for yourself, you can have greater financial control over your business and pay yourself accordingly. Taking the time to understand these documents is critical if you want to maximize your profits and take home a bigger share of them.

If you'd like help from an expert CFO, make sure to schedule your free consultation with Lizzette Sarria below.

Schedule a call here.