Welcome to the first Lighthouse Advisory monthly newsletter! I am so excited to share some of my favorite tips for managing your business. This month, I'd like to address the importance of understanding your recurring expenses.
Recurring expenses may come in the form of weekly, monthly, or annual expenses needed to sustain your operations. Through the COVID-19 pandemic, it has been important for businesses to cut back, operating as lean as possible. But what does this mean?
Review your expenses to determine the amount and frequency of the charge. Use this information to determine your monthly operating expense.
Assign each expense a 'stoplight' color based on how essential it is to maintaining your business:
Red - critical to operations
Yellow - nice to have, but you could do without in a pinch
Green - you could easily do without the expense
Summarize your monthly operating cost by the stoplight colors, comparing the result to your cash on hand.
How many months are you able to operate at full speed?
Could you go longer if you trimmed back to only the yellow or red expenses?
Do you have accounts receivable or planned revenue that would increase your ability to continue?
Using this information can make it easier to set a goal for yourself to save up the funds to continue in a crisis.
If you're interested in learning more, please reach out for an initial one-on-one consultation to discuss your individual needs.
