Imagine, you are about to launch your e-commerce service. Then what are the things that you need initially, where would you like to spent so that it helps you to explore your business and what are the possible sources of income . Reviewing financial statements and analyzing income and expense gives you a tool to improve the bottom line.
Profitability is the primary goal of all businesses.Without profitability your business will not survive in long run. We all know profitability is measured in terms of income and expenses.
So,today i will discuss a general topic, "income and expense analysis" and how it is important for your business. Income and expense are ultimate thread of any business operation. It describes the capability of a firm. Generally most of the large businesses are using specific tool to manage their income and expense, because they know its impact on overall business operation. There are lots of Cloud based expense tracking system for small businesses are available .Your revenue depends on this analysis. If you are doing proper analysis of your income and expense then half of your business problems has been solved.
Now coming to the most important part, what are the impacts of income and expense analysis on your business or what are the useful insights that you can get from this analysis. I will describe all possible business operations which are related to income and expense structure. Do you know, how your income and expense reveals important secrets about your business.
1.How to do proper budgeting and planning?
Do you know spending pattern describes how to set budget for business. It is all about a snapshot of where and how to spend money. You must need lots of things for your business but at the beginning you can't implement all those, then What you should do? You have to set the priorities based on your requirements. How will you do that? You can go for Cloud based accounting budgeting tool for SMEs, or You can do the following:
Set your goals (sales target)for each months. How much needed to achieve it in how many days (Your current position)? Find out where you are lagging and now take quick decisions on where to focus in order to achieve your goal. 2. How to do better investment plan?
Get funded by an investor is the first step of success for every start up business . But sometimes they are doing mistakes in how to utilize that amount so that it will give expected outcomes. You need to know about how much you should spend in marketing & advertising,hiring,technologies and other business operations.
Find out which spending contributes more profit to your business. What would be your valuation after an estimated time(1 or 2 year). Track your expense pattern Based on your income and expense you can determine how much money you need in the form of fund. 3. What's your profitability?
You might be knowing, 70% of the small business close there shop down due to the lack of knowledge and willing ignorance among the business owners. If the owner knew what they were doing wrong, they might have fixed the problem. Don't fall into the same trap.
Few points to be noted:
How much cash you need to have to be really profitable How much sales you need to achieve that amount in one month. A good duration to achieve this Profit per month you need to achieve this. 4. Who are your potential clients or vendors?
Based on your income and expense pattern. There should be a list of your customers and vendors along with how much they are contributing to your business. You can focus on most contributing client or vendor by rewarding them. It helps you to make better customer retention.
It is not about planning strategies, you have to find out the opportunities which enable you to convert those strategies into profitability.