Building a Successful Financial Model

Posted by | January 24, 2017 | Accounting, Entrepreneurship, Small Business | No Comments
Finances

“Being proactive is about taking responsibility for your life. Reactive people, on the other hand, are often affected by their physical environment. They find external sources to blame for their behavior.” — Steven Covey

What’s keeping you from reaching your goals? What are the steps you need to take to move from point A to point B? The answer lies in your financials.

Creating a Financial Map

Look at your bank and credit card statements over the last six months. From those statements, look at how much money came in and how much went out. Now take what happened in the last six months, look at the average, and repeat that average over the next 12 months. After you’ve created an accurate projection for the next year, you’ll start to see the gaps in your income, and from there you can start setting goals to fill those gaps.

If you’ve noticed a gap in your expectations versus your projections over the next year, think about the key indicators that are pointing you toward that goal. Are your expenses too far out of line? What about your sales numbers? These are the kinds of questions you’ll be able to answer once you have a clear financial map. Most people don’t consider these factors and therefore don’t have the foresight to see how they’ll be able to achieve them.

Creating Clear Projections for the Future

Growth by itself is meaningless. Simply saying that you want to grow your business doesn’t help you set a career plan. Instead, focus on having clear projections in mind. How do you want to grow? By how much? What does that growth look like?

If instead you say “I want to grow my business by 10%”, you can use your financial map to look at what monetary resources are needed and if that’s a practical goal. You can start to look ahead to visualize your goals and work proactively to achieve them.

Most accounting is reactive, it’s done by business owners rushing to check with their CPA at the end of the year to ask how well they did. By being proactive about your accounting, you’re able to take immediate action when it comes to your finances and structure them in a way that helps you reach your goals.

Find out how Kahuna can help you be proactive about your accounting