Writing The Financial Numbers

One of the most important lessons I learned from CNBC’s “The Profit,” where millionaire Marcus Lemonis invests his own money to help failing small businesses, is the financial numbers. If you don’t know the numbers, you don’t know your own business. My modus operandi for many years was to figure out the numbers in March or April, fill out the tax forms, and shove the paperwork into a manila envelope. That always worked well for the short-term, but not for the long-term if you want a profitable business.

November is a good time for looking at the numbers. With the last quarterly payment from Smashwords at the end of October, monthly payments for Amazon ebook sales from September and October being paid in November and December, and no foreseeable first serial and/or reprint sales, I earned my income for the calendar year. Expenses are the only thing I can control for the next several months, and prepare for tax reporting next year.

I spent several Saturdays entering the numbers into a Microsoft Excel spreadsheet to determine my income, expenses and cash on hand. With pen, paper and calculator in hand, I rechecked all the numbers to make sure that nothing was amiss with the spreadsheet. That’s the easy part. The hard part was printing out the invoices to cross-check the transactions with invoice numbers.

What do the numbers reveal?

Missing Money From Among Invoices

One vendor allows customers to buy credits in advance to automatically pay for renewing services. I had four invoices that zeroed out the credit account and presented a balance due, and four invoices where I paid the full amount due. That meant I was missing $5.19 USD from the credits account. After opening a support ticket with the vendor, I got reimbursed the next day for $6.00 USD. If I haven’t checked the numbers, I wouldn’t have caught this.

Too Many Transaction Accounts

Most transactions got paid from the business checking and PayPal accounts. A few transactions got paid out of personal accounts (i.e., checking, credit cards and PayPal). I’m going to simplify the bookkeeping by having all transactions handled through the business checking account.

Profits (Or Lack Thereof)

Will I make a profit this year? I thought I was within $10 USD of making a profit by having income exceed expenses. Alas, digging deeper into the transactions, the gap to profitability grew larger. Unless I can write a lot of content in a short period of time and find publishers to cut checks in a shorter period of time, I won’t have a profitable year.

If you’re on top of your numbers, updating your numbers should take a few minutes to a few hours of your time each week. I should have my business tax return penciled in on New Year’s Day, saving me the headache of scrambling to put everything together at the last minute. With this year’s numbers in hand, I can figure out ways to reduce expenses and make more money next year.