Income Forecasting to Grow Your Business
Guest Blogger: Grace Mugabe, Financially Empowered
None of us are in business hoping to make a loss so knowing where you make your income is vital. But when was the last time you thought about the various places that your income comes from? It can be tempting to just lump everything under Sales and just look at the end of month or year figure, but having more than one income category gives you a vital insight into your business.
It may require some more time in setting up and reconciling your accounts but this additional effort will allow you some extra benefits that make it very worthwhile.
Firstly let’s look at some of the different kinds of sales you might want to separate:
Affiliate income - this may include programs you recommend and have signed up to their affiliate program as well as referral kickbacks.
1:1 Consulting - if you are in a service based business you may also want to split it into different categories for example the different packages you offer.
Product sales - again you may want to split this down even further.
Workshops or group consults - depending on your needs you may want to also differentiate between online and in person events.
Online sales - even if you are a service based business, consider adding a category for products such as ebooks that you offer online.
In person sales - markets, retail shops etc
Different locations eg if you have multiple stores
You can see there are many times you may want to segment your sales income. Now I am not suggesting you use every single one of these or you will be spending hours micro managing your income accounts.
The key question to ask yourself is - What do I want to know from this data? For example if you want to know whether online or in person sales are more profitable for your business then having 2 separate sales account for each will be super helpful. On the other hand if you prefer to know which program clients sign up for and are not worried about where they sign up from, then separating income by the programs you offer will be more beneficial.
Some of the things you are able to find out from separate income accounts are:
Which times of the year different aspects make you more profit.
Which areas of your business aren’t performing as well as you expect
Which areas are performing better than expected
Which marketing strategies have had an impact on your bottom line
Where you will need to allocate resources eg time, employees, supplies
Where you want to concentrate your efforts in the future for best returns.
You can see that creating different income accounts can give you a lot of insight into the overall performance of your business and where you should concentrate your efforts.
Financial information provides vital decision-making information for your planning and forecasting in your business. It can be as simple as when you reconcile your sales transactions adding in additional income accounts from now onwards. It doesn’t mean you have to go back over every transaction and re-categorise them.
Of course, I recommend chatting to your accountant or bookkeeper to make sure you are making the best choices for your financial position but this a great adjustment to your current financial reporting that will have a big impact on your forecasting and budgeting for the future.
Grace is a Certified Practicing Accountant (CPA) who is passionate about the economic empowerment of women. She developed a boutique consultancy, called Financially Empowered, with the aim of providing financial literacy tools for entrepreneurs & organisations which were affordable and accessible. Her consultancy continues to attract government, schools, private industry and community clients.
Her reputation has grown to be that of a knowledgeable, generous and ethical contributor to many worthwhile causes. Her pro bono work for not-for-profit and community groups has allowed individuals and organisations who would not otherwise be able to access such resources to benefit.