S6E17: From Data to Decisions: Decoding Your Bank Balance for Better Cash Flow

Disclaimer: The information in this video should not be viewed and is not intended as tax/financial advice. Consult with an expert before making any decisions regarding your finances. 

Ever looked at your bank account and thought, what does this actually mean for my business?

This week, I walk through a simple, no-fluff approach to understanding cash flow—just three steps and about 15 minutes a week. No software, no jargon. Just clarity.

You’ll learn how to make sense of what’s coming in, what’s going out, and what’s next—so you can make decisions with confidence, not guesswork.

If you’ve ever felt unsure about your numbers, this one’s worth a listen.

Transcript

0:10

Hey, welcome back to the Cash Flow podcast where we are going to start with a very familiar story. If you have not had this happen to you yet, I'm proud of you. I've certainly had it happen. Ever been on a zoom call or a Google Meets call or a teams call and zone out a little bit and you're paying attention to something but definitely not what's going on in the call and all of a sudden you hear your name and you've been asked a question. Used to be really bad when this happened in person in a meeting room, but now it's mostly on zoom and you've got a few choices now, right? Because you don't know what the question was. You weren't really listening. So choice number one is you go, you know, shoot, I wasn't listening. Could you say that again? Choice number two is you give Lyric a really vague answer that's kind of half assed and stands a pretty good chance of not answering the wrong question. But it's not very specific and detail doesn't give you doesn't give anybody a lot of information. Hoping to get a follow up that'll help you narrow it down. And the third is you jump in the water, off the bridge into the water and give a very specific detailed answer and it may or may not be to the right question. So let's take the example and expand it and let's say you look at your bank account balance and it's got a number on it and you have the same three choices. I haven't really been paying attention to what's going on in there and it's got a number and I need to make a decision so I can either take the first route and go, hmm, I really don't know what it's telling me, so let me go do some work and find out what it's telling me. The second is to say, well, there's some money in there. I don't really know what's coming and going. I could be right, I could be wrong. So let's do half of what I thought I was going to do if I was going to hire somebody. Let's hire them part time and see what happens and then we can zero in on it later. And the third answer is, ah, what the heck, I know I want to hire somebody full time. I am just going to dive in and hire them regardless of whether or not my bank balance is telling me I can do it or not. So we've got those three answers just the same way as when you get zoned out on a zoom call. It's my dog checking in on this, probably checking her bank balance, which is pretty small. So here's the key. The best answer, we all know, as much as it's hard to admit, and we judge ourselves really harshly, is to ask the question on the zoom call. Hey, I wasn't listening. Could you repeat the question? And as embarrassing as that is, that's certainly the most logical and the one that the answer that will lead to the. To the best answer to the question, right? We know that it's the same thing with our books. Now we're running at breakneck speed, and there is data everywhere coming at us, and the data is coming from our bank account the same way, but it's just data getting kind of splashed in our face or on our glasses or on our screen. And honestly, we can't do anything with it. I often say to my clients, to anybody I'm speaking to, if you just get a piece of paper with numbers on it, throw it away. It's not any good to you. If that's what your bookkeeper's handing you or that's what your system's handing you, it's a waste of your time. There's no context. You can't make any decisions with just data. What you can make a decision with is a story, okay? And guess what? Those numbers in the bank account, although you can't tell when you're looking at the balance, they're telling you a story about what's happening in your business day in and day out. It knows, believe it or not, as much as you do, and sometimes a little bit more about what's really happening in your business. And, like, is your margin quietly whispering, help me. You know, is your cash flow all of a sudden slowing down? Is your overhead, like, gone off on a run without you? Your bank account often knows that information before you do. But if we're kind of zoned out and not paying attention to it, we're not going to hear the story. And a lot of times people think, and I do recommend this if you're a bigger company, for sure, or if you've been in place for a long time, or if you have tough decisions to make. A bookkeeper is the person that translates that bank account information into a story. So if it's done correctly, right, All a bookkeeper's doing is taking all that data that's sitting in the bank account, running it through this master sort of. It's called a mapping table, or consider it just a transformation. Cube and out. It comes in all the categories and on the timeline that you've actually had things happening in your business. So that you can then look at that timeline and see what's going in, what's coming out, what's left over, and know what's driving it. Is it a cash flow problem? Is it a margin problem? Is it an overhead opportunity? That's what you need in order to make sense of things, and that's what a bookkeeper does. Okay, so you can stay zoned out, not looking at your bank account, but you know that anytime you want to, you can pick up that piece of paper and go, oh, right, right, right, right. There's the story. That's what my bookkeeper is doing. They're keeping it up to date. I'm not going every three months and saying, catch up on it. I actually can look at it and say, hey, oh, yeah, I see that story. I do have a little bit of extra money to take care of this opportunity to pay myself some more to invest in marketing, to hire somebody, whatever. Whatever it might be for you that you need to do or make a decision about in your business. You need a number story in order to do that, as opposed to just a batch of numbers on a piece of paper. So not all of us can afford a bookkeeper. Not all of us need, really a bookkeeper. Not all of us want to go through the process of hiring a bookkeeper and going a little crazy trying to get them trained on our business and all of that. We're running so fast. That's hard. I get it. I always will recommend that you do that. I always will tell you that the investment in that, if you're serious about your business, is going to pay off so, so much in the end. And I know this after making lots of money, unfortunately, from people who come to me after they've let it go 6, 10, 12 months, and they're like, you got to catch this up for me because I want to hire somebody. I want to sell the business, I want to buy a business. So I will always recommend that. However, I also know reality and can balance that a little bit. There is a way that you, by yourself, can spend 15 minutes a week. That's it, 15 minutes a week with a little piece of paper that I'm going to tell you how to create and know and understand at least 60 to 80% of the story that your bank account numbers are telling you. I wish I had this trick for Zoom, but I don't. I guess I kind of do. You've got AI now on Zoom, right? You can push the button and say, what did I miss? So this is sort of the what did I miss? Answer. This gives you some information to make a good decision on so that you don't have to go. So spend money on a bookkeeper or, you know, dive into them yourself for eight or ten hours. Here's all you need to do. What you want to know is from that bank balance, which may sit there at $2,000, when you look at it, that bank balance is like the very tip of an iceberg of a story of how we got there, okay? And you can very simply look at the last week of transactions or month of transactions in your bank account. Literally, just look at them online, just take a glance at it, and you'll be able to create three numbers, okay? And the three numbers will be over the last week. Let's make it a week. I have had this much money hit my bank account. I have had this much money leave my bank account, and I'm left with the difference. So let's say Your balance is $2,000. What you need to know, all you need to do is get a piece of paper and write down for the last week, and you're looking at the transactions online or you've printed the statement. I don't care which. It's going to take you 15 minutes. I need you to commit that 15 minutes. But in the last week, I have this much money has landed in my bank account, this much money has left my bank account. And the difference between those two numbers is what's left in your bank account or that $2,000 balance. So it could be either, you know, I've made a million dollars and I've spent$998,000 or 998,000. Or it could be I brought in 100 and spent 50. Who knows how that 2000 was created? But you will now, because you're going to have this piece of paper with the total amount that came in, the total amount that went out, and what's left. And what you're going to do then is just spend a minute with that total amount that came in and think about what was it that came in? It was two clients at$5,000 each. It was one client at $100. It was four products at $25 each. Who cares? Was. Whatever it is, you've got two things to know about it, okay? Just two. How many was it and how much did it cost? So that you can go, okay, I sold five things for $20. Each. And I made $100. Cool. $100 in. Now I know how that happened. You've now defined the story of your business that quickly. That quickly. You've defined the revenue process for your business because it's only made up of two things. Quantity and price. Okay, so now you know two levers. Quantity and price. Cool. Let's move on to the expenses. Now you know we need to know how much money left your bank account. So you add up all the money that left your bank account, put the number on the page, and then break it down into its categories. This much was because I had to pay the rent. This much was because I had to pay my contractor. This much was because I had to go to an event. Okay, so now you know what makes up those expenses. So you've taken now one number with just. And literally, this hasn't even taken five minutes. 15. Five minutes yet, much less 15. You've taken a single number that you stared at that made you kind of go, ah, I don't know what that means. And you've created something that tells you all of your business levers. That's simple. That's what a bookkeeper does in mass for you, Right? Like, this is a very narrow exercise, but it gets you to an answer, right? What you're looking for. So now that you know that. Now that you know, this week I sold eight things for a certain amount, and I spent money on these five things. Now I want you to take the next step, and I want you to make. You don't have to make 11 columns, but make five columns for the next four, five weeks that are coming up. And I want you to think about. And I know I'm not even going to use the word that this is called because it scares people off, but all I want you to think about is next week. How many things am I going to sell for what price? And put that number in the incoming line of your second column. Okay? And then I want you to think about, how much am I going to spend next week? Of all these things that I spent on this week, how many recur next week? How many new ones pop up next week? Guess what? Now you've just taken a look forward. You've taken a look one week forward in your business so that you can now answer that question of can I hire somebody? Almost. I want you to add four more columns. Then after that, look at the next five weeks. And I know the word I didn't want to use is forecast because it is a little bit scary, but that's all it is. All it is is saying, hey, for this money that comes in, what drives it? And how much of that's going to happen over the next four weeks? And then for the money that goes out, what drives it and how much of those things are going to happen over the next four weeks, five weeks. And those things that happen over the next five weeks, that's your business story, right? And by the way, when you add all that up, it comes up to what your balance is going to be at the end of each week. So if you're ready to make any decisions, you add those decisions to it. I'm going to hire somebody in two weeks. So in two weeks I start adding the payroll for that person. And if all of a sudden I do that on this little piece of paper and one of those numbers that's the balance goes negative, all of a sudden I've got insight into that and can say, oh, shoot, I need to either borrow some money, sell more stuff, or wait to hire that person. You've all of a sudden narrowed one number on a bank balance, a bank account, into a business decision that's solidly based in the story of what's happening in your business. And that's what it's all about. That's what bookkeeping is all about. And that's how you can kind of put a quick patch on things to get a reasonable answer when you have to make a tough business decision. So I hope this was helpful. Hit on the link down below if you want it to be a little fancier, but definitely hear the story from your bank balance so you're not caught with that. Oh, what do I do now? I just heard my name. Take care.