March 03, 2013

Assessing your monthly outgoings

One of the New Year’s resolutions for businesses that often get thrown around is a suggestion to keep better records. As part of that, if you’re not already being very careful with your record keeping, you should keep better track of your monthly outgoings and properly balance it against your monthly income.

The benefits of this should be immediately clear and if they are not, I would suggest going and asking someone why it’s important. Anyone will do. If you have small children, even they will probably know.

So why write a slightly patronising post as to why it’s important to have more money coming than money going out? Well, it’s very easy to let it run away with you and for it to creep up on you. Without properly tracking expenditure, before you know it you can be hemorrhaging money faster than you can collect it.

The business insurance for small businesses to help them cover the unexpected, but being aware of your finances can be a sure-fire way to cover you from an easily avoidable disaster. Here are some of the things that you might not clock if you’re not keeping a close eye on what your money is doing.

The well paying client on paper

Sometimes a job will come along that just looks incredibly juicy. The money you will collect from completing the task for fulfilling the order or contract depending on your trade can be eye wateringly tempting.

Without keeping proper records of your monthly outgoings, you might not spot if a job like this bleeds you in other areas. Maybe materials aren’t covered in the contract and are much more expensive than anticipated, or maybe it’s simply an issue of time. You might be making a lot of money, but the time commitment might be driving your hourly rate down effectively to £5 per hour.

Death by 1000 pennies

The income might be looking good and the outgoings look like they’re small, but maybe you should look again and add all of those outgoings up. It’s something that trips a lot of people’s personal finances up in that several small single figure subscription direct debits quickly add up to make one giant wage-eating monster.

Low paying expensive ventures

Similar to the well paying client on paper, these are likely to be things that you’ve started up with an expectation to make a loss initially, only to find that they’ve never quite picked up enough steam to be profitable.

Without keeping comprehensive records, you might not be aware of just how many these things are costing you. Conversely, you might assume they are losing you more than you think and if the drain on your finances is minimal, you might reason that they provide value to your business in other areas instead.

Summary

You should be keeping track of your finances anyway and should always be at least vaguely aware of which way the wind is blowing in this respect, but keeping better track of it will let you spot critical problems sooner.

When you’re starting to scrape the bottom of the money-barrel, it’s often far too late to do anything about it, but if you can spot that your money is slowly dripping away early, then you still have time to identify and plug the leak.

Your Insurance specialises in providing business insurance for a range of small businesses in several different trades.

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