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.
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.
Cash Flow Wizard and Head Duck Wrangler