This is the month that I’m most elbow deep in numbers with clients and myself — time to look back on the financials and see what worked and what didn’t, and also what to tweak for next year. All the normal stuff: how was profit? Can I hire?
Except… this year was a shitshow of unexpected horrors, and maybe a few delights depending on your circumstances. There are a few extra things I’m looking at with clients and with Wanderwell that I want to pass along to you:
💸 Look at Revenue changes directly due to Covid: What was the amount of revenue change due to Covid? Losses, as well as opportunities or gains. Did revenue shift streams? (ie, this week I looked at one client’s financials that saw huge growth in online sales — from a piddly token amount to a major revenue stream. There’s a lot to think about there.)
Look at the fluctuations and figure out what they totaled. One question I’m asking is “If I were going to better plan for volatility in the future what does this number tell me? Do I need to plan runway differently?” (Answer: Yes, yes I do… yes, you probably do too.)
💸 I recommend most people check in with their accountant before the end of the year, but especially this year, and especially if you received any kind of relief funding. Taxes could be weird. As of right now, expenses used for forgiven PPP loans won’t count as deductible expenses… aka, could affect your taxes. There’s some grumblings that the inept powers that be might change this rule… but you’ll want to assess.
💸 Margins are as important as ever! Looking at whole numbers like revenue or expenses or profit are great… but make sure you look at your margins too (A margin tells you about the relationship between two numbers — so Gross Profit margin is the relationship between top-line Revenue and what it costs to make that revenue via Cost of Goods Sold).
I’m doing a review this morning for a client that is at 50% of revenue from 2019 (ie, they usually do ~$4million a year, this year it’s going to be closer to 2 million). That sounds appalling, and it is awful — they def laid off employees — however, their margins are clocking reasonably similar to historic. What this tells us is that they understand really well the pattern of how money moves through the business and have adjusted various levers accordingly to achieve similar results at a much smaller size. If we just looked at the whole numbers, it would be hard to read exactly what’s happening and what changes they should make going forward.
Maybe your margins tell a different story, but know that much of the story of how the money worked (or didn’t work) this year will be found in the margins.
There are certainly other things to look at, depending on your year! However those are a few that will be especially helpful this year.
We will be opening up space for new clients around mid-January– looking for support understanding your financial picture? Click here to get in touch.