After living through 2020, we all should have a new appreciation for managing risk. Our recent experience with the COVID-19 pandemic is a clear illustration that there are unidentified risks in the market. The National Restaurant Association released the results of a survey this week revealing that 17% of restaurants nationwide, more than 110,000 establishments, have been closed permanently or long-term. The vast majority of these closures are restaurants that were well-established businesses within their community. I am not sure there is much the restaurant industry could have done to prepare for the pandemic or mitigate its impact. Still, the quick decline of the entire sector should be a lesson for all business owners: don’t wait until a financial disaster strikes to get your accounts under control.
My recommendation to you is to spend time now getting your business and financials organized in preparation for 2021. Proper preparation now will take some risk out of your operations next year.
Learning how to organize my work correctly was vital in my transition from an average student to an excellent student during my years at George Mason University. I then carried these lessons into my Master’s degree at George Washington University and throughout my financial management best practices.
Over the years, I tried different tactics to get through my classwork successfully. It took trial and error, over and over, until I finally discovered that if I approached my work differently, the answers would come to me naturally. My trick was to organize the information before diving into the analysis. This preparation enabled me to consider the facts alone and make data-driven decisions, not just “gut feel” assumptions I wanted to make. Once organized, I was prepared to tackle any problem that was in front of me.
The concept that I am trying to portray here is to get your financials and business organized to know precisely where you stand. I promise this will help prepare you for next year.
Need help getting started? Download your current balance sheet and ask yourself if you know what your current balances are in each account. Rate each account from one to ten, one being not accurate and ten being highly accurate. Any account that is below a seven needs some of your attention.
For example, are there invoices in your account receivables that you know you will not collect or bills in your accounts payable that you have paid or do not need to pay? Or perhaps there have been transactions posted to other asset or liability accounts that do not make sense. The ideal situation would be that each account on your balance sheet has a detailed list of items that you are 100% sure are accurate. That way, you know your balance sheet is telling you the truth about your business.
Want help walking through the process? Call me at (703) 544-7047.