Cash Flow Part 3: The Secret to Checking Your Money

How do you reduce your stress about your money?

How do you save more money for your goals?

The secret is in the system.  You must create a system for checking on your finances each week, month, and quarter, to make sure that you did what you thought you were going to do, and to make changes for the future. 

But for it to work, it must be easy and not take a lot of time.  Otherwise, you are going to get overwhelmed and procrastinate — which defeats the entire purposes of monitoring your cash flow. 

I’m not talking about checking on your stock portfolio.  I’m not talking about balancing your checkbook, or imputing stuff into Quickbooks.  I’m also not asking you to look over all your receipts. 

The system is to create reports (or have your software program, bookkeeper, or assistant create reports) that you review each week, month, and quarter.  These reports must make it easy for you to see if you are on track, and for you to decide if you need to make changes to your behavior, so you can meet your goals.

Personal Finances

In our personal finances, we typically have an issue with our expenses.  Our personal expenses fluctuate month-to-month, and tend to creep up over time if we are not keeping on top of them.  The secret in personal finances is to monitor your discretionary spending on a regular basis (weekly, monthly), and your fixed spending (bills) on a quarterly basis.

How do you do this?   It may be as simple as keeping a detailed log of your "problem" areas, so you can monitor them on a weekly basis - such as toys, clothing, shoes, dining out, or online shopping.   You may also use an "envelope" system, where you set aside $200 a month for shoes, for example, in cash in an envelope, and when that cash is done, you are done for shoes that month.

Then, you can just worry about the big stuff that tends to stay the same from month or month (grocery shopping, gas, bills) at your quarterly review.  (we will discuss quarterly reviews next week)

Small Business Finances

For small businesses, the issue is usually not expenses — it’s fluctuating income.  There, the secret is to monitor your income and marketing campaigns on a weekly and monthly basis — so you can make changes immediately if things start to slow down.

Small business owners should have a weekly report of all marketing campaign statistics, such as visitors to your website, new subscribers to your eZine or blog, introductory appointments made, purchases, new clients signed, subscriber drop-outs, and conversion rates.  If things are down one week, you can immediately ramp up your marketing to make up for the lull.  That way, you won’t be surprised in 6 weeks when you income goes down because you had let your marketing slide one month earlier.

You should also be reviewing cash flow projections on a weekly basis, which take those marketing campaign data and use it to project how much income you will have in upcoming months and quarters.  In your cash flow projections you will be able to see which expenses will be coming out in upcoming months — so you don’t accidentally think you have extra month this month (and spend that money), because you forgot that your big insurance payment is due in 2 weeks.

On a monthly basis you will also monitor your Profit & Loss statement  and your Balance Sheet, which will give you a snapshot of how your business is doing for the month, quarter, and year. 

You can have your assistant, bookkeeper, marketing consultant, or accountant create reports for you, but you MUST be reviewing them yourself.  Only you can make the necessary changes and interpretations that will fully utilize the reports and keep your business in the black. 

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