Advivo Partner, Chris Morris, shares his insights on how to get financially fit in order to reach your goals
December and January are the months when many of us use our holiday enthusiasm to put goals and actions in place for the year ahead.
Many goals require some level of financial savviness, whether it be to buy that investment property, expand the business, or even to be able to spend more time away from the business!
Financial fitness is the key to achieving all of these goals; here is how you can do it:
1. Ensure your business financials and bookkeeping are in order and closed off each month.
This means you’ll have relevant, up to date information on hand ready for whatever is next for you and your business.
2. Understand the key numbers that drive your business.
Now that your financials are accurate and up to date, key metrics for your business will be easily visible. Understanding these key metrics and what they mean for your business is imperative for goal setting and monitoring the financial impact of the movement in these key numbers. Some common key numbers/metrics include Gross Margin, Break Even, EBITDA, Quick Ratio, etc.
3. Know how to use your key numbers to support decision making.
Gross Margin is a key metric for making decisions such as ‘should I put on a new salesperson’ or ‘should we take on this additional work’. Your Current Ratio or Quick Ratio, along with other key balance sheet metrics are used for determining the current position of a business entity. These can be used to help form a snapshot of your business’ financial fitness.
4. Put yourself in a position where you’re able to act on opportunities.
Once the above is understood and able to be managed, you can ensure you and your business are well positioned to quickly respond to opportunities as they arise.
It’s never been so important for individuals and business owners to be financially fit. In the current climate, it’s financial fitness that allows people to act quickly and take advantage of opportunities as they arise. It’s also those who are more financially fit who can identify more opportunities.
What if I’m not financially fit?
Lenders are demanding higher levels of financial fitness from their customers and for goals that require financial support (such as that investment property or business expansion), so it makes sense to not only understand your financial position beforehand but also what your position will look like into the future. Stay tuned for next month’s newsletter to learn more about the type of information banks look at and in the meantime, click this link for more information on the importance of forecasts and budgets.
If you’re not financially fit, you risk not being able to act on an opportunity as it arises, or worse yet, not even identifying an opportunity. With the rate at which change is occurring, and which we all know can be thrust upon us in the current environment, it makes sense to make one of your goals to improve your financial fitness.
Just like your health, once you get fit you want to maintain that level of fitness. To do this you need to monitor these key metrics on a monthly basis and act quickly on any negative trends.
The good news is, Advivo is here to help! If you’re looking to get financially fit in 2022, contact us here to find out how you can get on top of your financial fitness.