Work Out How Much Money You’re Retaining
Once you’ve added up all your income, take away your total expenses, and hopefully you will be left with a positive number. (If it’s not a positive number, you will need to increase revenue or reduce costs, and fast!) Any money left over you will keep in your business, and you can put it toward a cash buffer and growing your business.
Your business, Blue Widget Co. takes in $20,000 a month on average and spends $14,000 a month on goods, salaries, operational and hidden costs. You’re creating profits of $6,000 a month, which you can use to grow your business or create financial stability.
It’s useful to drill down into your revenues and costs. Categorize all your income and expenses into different “buckets” so you can see the main contributors to your profitability.