Understanding the types and hierarchy of the line items in your chart of accounts will make it easier to maintain clean books, and use your accounting software properly. The chart of accounts categories fall under a few basic groups: income and expense, assets, liabilities and equity accounts.
All too often we see people over plan and make no progress, as opposed to measure how their plan is working and make the necessary changes to the plan as conditions change
In the last blog post we talked about creating an operating budget. This is a blueprint of your operations to help you chart the growth
Start by reviewing the numbers that show your actuals (from your P&L report), your forecast (based on where you think you can make adjustments), and the difference or variance for each line item. Now you have a working budget!
It might make it easier (and more palatable) to think of budgeting as profit planning. If you have a profit plan in place, then you can truly track your income and expenses in a fashion that gives you a clear plan as to how to increase your revenues and where to cut your overhead.
With any small business, cash is king, and keeping ready cash available to cover expenses and payroll can be an ongoing challenge.