Do you know how to evaluate the financial position of your business? When it comes time to review financial data, many small-business owners don’t know where to start, what to cover or who to involve. For an easy way to ensure a strong financial position and stay on track at your small business, we’ve developed the ‘PROOF test’ to apply to your financial data every quarter.
P – Plan
All businesses, big or small, should be working under a plan to achieve business goals. Goal setting should involve refining your overall dreams for your business. It should also address practical goals you can achieve within the next quarter.
When it comes to goal setting, it’s especially important to be realistic. Setting yourself up for failure by aiming for the clouds will only damage your morale.
R – Review
With your goals in clear sight, you must now review. The review stage of the PROOF test involves reviewing your immediate past performance and subsequent financial position. How have you performed this quarter compared to previous quarters? Is your business continuing to grow, or has it begun to stagnate? Did you achieve the goals set in the previous quarter? If not, why not?
O – Oppose
Using your financial data, oppose your budget to actual performance. Did you come in under budget last quarter, or did you exceed your budget? Do you need to improve your cash flow to stay on track to achieving your goals? Alternatively, do you have budget to expand your operations in any way?
O – Observe
It’s time to widen your perspective and observe changes to your wider business environment. Are new opportunities available to you? Are there new competitive entrants to the market or new advancements in technology you could use to the advantage of your business?
Whatever the changes, account for them in your plan for the coming quarter. Using a scenario planning tool, you can see how the financial impacts of a changing business environment can be felt through all levels of your business.
F – Focus
Finally, focus on the quarter ahead. What noteworthy events are coming up that may impact the financial position of your business? Whom do you need to communicate your quarterly goals to in order to ensure they are met?
If you’re looking for a way to easily access and interpret your small business’s financial data in real time, why not sign up for a Reep free trial? With live access to your data, Reep gives you a helicopter view of information that’s constantly being updated in clear, visual representations.