Category Archives: Get Your Ducks in a Row!

Ducks in a Row: It’s All About the Benjamin…Franklin, that is.

There are two ways to increase your wealth. Increase your means
or decrease your wants. The best is to do both at the same time.”

— Benjamin Franklin.

Benjamin Franklin portrait isolated on white backgroundBenjamin Franklin was a wise man. He was also a wealthy man. He grew wealthy as a self-employed publisher. Let there be no doubt that he was a man who knew the numbers side of his business. He understood the essential rule of business. You increase wealth one of two ways. Either increase your revenue or decrease your expenses. And better yet, do both.

In business, that’s the only equation that matters when it comes to finances. All financial management can be distilled down to that one equation. Increase revenue plus decrease expense equals more profit. It is profit that builds wealth. A business without profit does not prosper. A business with profit that is then heavily taxed by the government does not prosper.

In recent years a lot of talk has gone on about disgustingly profitable businesses and high rates of CEO pay. This is not representative of the vast majority of businesses in the United States. We are a nation of shopkeepers, service providers, and small manufacturers. According to the Small Business Administration, there are nearly 24 million businesses with the business owner as the only “employee.” And all those businesses together generate just 4% of the total economy. That’s a lot of very small operations, with business owners all working away at making a living for themselves and their families.

As one-person business owners (and I include myself in the ranks), we have special concerns and challenges. How do we make enough to pay the bills of the business, provide a satisfactory living for ourselves, and keep the process going year after year? How do we make the best use of our most precious and limited resource…Time? How do we make the best use of every dollar that comes in to the business? How do we bring in more dollars consistently? How do we move from survival to profitability and wealth?

The way we answer those questions determines the success or failure of our businesses. That’s a whole lot of pressure, isn’t it? But, by distilling it down to Benjamin Franklin’s equation: Increase revenue AND decrease expenses, we can simplify the process. That simple equation leads to questions like this:

• What are my best opportunities to increase sales? (Untapped potential or underused assets)
• Do I have leaks in my business that drain cash and provide no benefit? (Bank fees, subscriptions)
• To increase revenue will my expenses need to increase? (Think marketing or cost of goods)
• How can I minimize my tax burden? (Better tracking of financial information, hire a CPA for taxes)

Running a successful business isn’t just about how we deliver the goods and services we provide. We have to be financially savvy, too. Once we combine talent in delivering the goods and services with the talents of business acumen, we arrive at a place that Old Ben would consider to be “healthy, wealthy, and wise.”

Financial Organization: The First Step to Getting Your Ducks in a Row

Closeup of a hand gripping a message "Get Your Ducks In A Row", possibly for a business strategy, isolated on a white background.
We all know what we’re supposed to do, right? We know we need to eat healthy, exercise regularly, and call our mothers. And if we own a business, we know we’re supposed to take care of that pesky financial stuff like keeping track of what we spend, what we owe, and what hole the money went down. If you’re like most business owners, you’ve probably mentioned to yourself (okay, nagged yourself) that you need to “get your ducks in a row.” And maybe, just maybe, you wonder to yourself just what having your ducks in a row really means. What should you be doing that you’re not doing? And even more importantly, if you did do that thing, whatever it is, what difference would it really make?

I’ve gathered up a few of my duck friends to help you out with this important subject.

ducks

First and foremost, in the process of “getting your ducks in a row”, having some sort of holding pen to put those wandering ducks into once you’ve herded them is important. When we’re talking about the financial aspects of your business, this holding pen can be a software program like QuickBooks or Xero or an Excel spreadsheet. Or if you’re more old school, a shoebox. Now, I don’t recommend keeping your ducks in a shoebox, but if that’s what you have, we’ll start there and work our way into a better system.

Once you have some sort of high- or low-tech containment solution, the next step is herding the ducks into it. Financially speaking, those “ducks” are things like receipts, checks, bank deposits, bank statements, credit card charges, and the like. Each one of those “ducks” is a part of the puzzle that tells you what is really going on in your business. Each piece of the puzzle put together in an appropriate way, reveals a complete picture of your business.

Every check, receipt, deposit, credit card charge then gets sorted into a bucket. This receipt goes into the bucket called Office Supplies. That credit card charge goes in the bucket called Gas. This deposit goes into the bucket called Sales. And so forth, until all the pieces of the puzzle are sorted out.

From there, the buckets each get totaled up. Those totals tell you important things about where your money came from and where it went. To make life easier, we put all those totals in a column. Money in goes at the top, followed by money out. Money In minus Money Out equals Profit. Or if the ducks are too hungry…Money In is less than Money Out and that means one of your ducks has got to go.

Often, keeping track of the ducks gets pushed aside when the business owner is occupied with other things…like providing services or goods or putting out the inevitable fires of running a business. Then, the ducks wander off in all directions. This is bad. Once you lose control of the ducks, herding them just gets harder. But, once a year the Day of Reckoning arrives. The Duck Revenue Service stops by every April 15th to find out how many ducks you have. This is sometimes the only time a business owner gets her ducks in a row. Herding ducks on a deadline is very stressful. It’s also far too late to find out what you needed to know to help your business succeed because the ducks you’re herding on April 15th are last year’s ducks. They’re the ducks that have already flown the coop.

Getting your ducks in a row is an important function of running your business. Stay tuned for real world solutions to make the process easier, and for insights on how to use the information you gather to create a more profitable and cash flow positive business.

Until next time…Don’t be a chicken. Get your ducks in a row.

Classic yellow rubber ducks in water.

Caroline Grimm
Cash Flow Wizard and Head Duck Wrangler