Your Business Needs A Daily Financial Report

One of the lessons I had to learn the very hard way in business was what happens when you run out of money and you run out of money because you weren’t paying attention. Now, in my personal life, I really struggled with this for a very long time. And I think it was directly responsible for a lot of the problems that I was experiencing in my financial life, which was simply the fact that I wasn’t tracking my money in and I wasn’t tracking my money out. And this was because I didn’t have a lot of money coming in, and any of the money going out kept putting me into the red. So whenever I would look at my bank account, it would very often be in the red. It would fill me with so much anxiety and so much humiliation and shame, all these negative emotions, that I would just put my head in the same, pretend it didn’t exist. But that didn’t make the problem go away, it just made the problem worse. Right? You can’t slay the dragons that you refuse to acknowledge.

And so that was a lesson I had to learn the very hard way that to get out of that, I needed to change that habit and start looking at my money every single day. And that gave birth to a daily habit, which I have continued to this day, which is to every single day. Look at my bank accounts. Look how much money is in there. I track how much I spent the day before and how much I made the day before. And just that simple process has empowered me to know exactly how much money I have coming in and out at any given moment. It’s giving me a lot of relief. And as a result of that, which we focus on expands, my money game has expanded as well.

So that I learned in my personal life, but it took me a little bit longer to apply it diligently within my business life. And the reason for that isn’t because I didn’t know about the importance of it, but it was because I didn’t. Because it can get very complicated in business. As you have multiple checking accounts, multiple credit cards, and multiple vendor statement, like all this stuff, the bookkeeping side of business can be very stressful if you allow it to be. And you have to learn this because finance and accounting is the language of business. But there are ways, once you get to a certain scale, that you can start to simplify the process for yourself. And what I want to share with you today is just the daily financial audit or the daily financial report that I look at every single day in my businesses. And I encourage you to think through how can you apply this to your daily life? It is very, very simple.

It’s very simple. At this point. I have my bookkeepers put this together and send it to me in an email form. But you might be at the point where you can’t afford a bookkeeper to do this. So you just go into your checking account, into your credit cards, all that stuff, right? And you just look at it, just look at the numbers. And there’s really just three things that we’re looking at here. Number one is how much cash is in the bank. I like to know how much cash is sitting in all the different bank accounts that you have a good sense for.
How much do you actually got? Because at the end of the day, like, it’s one thing to project profits, one thing to say, oh, we have this much revenue coming in, but there’s usually this lag between revenue being realized and cash hitting the bank. And so if you run based off of your p and l, you’re going to find yourself in a lot of trouble making your bills, because I guarantee your receivables. The money that’s actually hitting the bank on time isn’t getting there when you think it is. And so you need to be looking at that every single day. The second number that I have them send me is all the receivables, all the receivables that we’re waiting on. So if we had $200,000 of revenue last month, but we have $150,000 of receivables, that gives me a pretty good picture of what I can expect over the next 30 days to be coming into the bank account. I can take that number, I can triangulate it against the cash in the bank and get a good sense for, are we collecting these in a timely fashion? Now, one of the things that kills businesses is they wait too long to collect on their receivables. They give people net 60, net 90, or net, you know, 100, 8180 days to collect on a bill is a really long time after you’ve already delivered on the service.
You might have people who are slow to pay their bills. And so one of the first things that you want to do if you find yourself experiencing cash crunch and you don’t have the cash flow to be meeting your requirements is to shorten the receivable life cycle down to net 30 at maximum. But making sure that you’re following up in a timely fashion to get your people, your customers or clients to pay their bills on time, that’s a huge thing. So that’s the second thing, we look at the cash in the bank, at the different bank accounts I like to see it listed out of, and then the receivables that are coming in the next 30 days, and then any receivables that are outstanding beyond that, that is a red light for me to say, hey, we need to run hard at getting that. The last one is just payables. What can I expect in the next 30 days to be going out of the account? And I want to see, do we have any big vendors coming up? Do we have payroll coming up? Do we have a big tax bill this quarter coming up? I want to see very clearly what’s about to be flowing out of the bank account, so that, as it happens, I’m not surprised by it. And that’s the number one rule here, is as you’re running your business, as you’re talking to your accountant, your bookkeeper, or you’re doing this financial management yourself, is to say, under no circumstances should I ever be surprised if something bad’s coming. If a big bill’s coming, I need to know about it as soon as humanly possible.

The only mistake here is that I am surprised by it when it’s too late to actually do anything about it. So that’s the daily cash flow or the daily financial report that I like to receive. It’s very simple, but it’s very, very effective. Now, within your personal life, you can use Monarch or kubera. Those are two technologies, two softwares that I use to track my personal finances. And within your business, you can have quickbooks Xero. They can issue these reports, largely automated, or you can have your bookkeeper and your accountant send them to you in the form of an email. That’s my preference.

I don’t actually have to log into softwares. I hate logging into softwares. The fewer softwares I have to have access to, it’s the better for me and for the team. And so I prefer just to get that information in an email. So that is my daily financial report and how we operate. Take this run with it. Get your head around your numbers, and I promise the amount of stress that you experience on a day to day basis will decline as your revenues and profits incline. Haza.

Okay, that’s going to do it for me, guys and gals. We’ll see you in the next episode. Stay hyper focused.