Auditing Your Finances

It’s December 21st, and the world didn’t end, but what that means is that you have to get your life together and ready for next year. A few months ago, I talked about doing a fall audit on my closet, and household items. December, well specifically this week, is when I do an audit on my finances. Being a consultant/freelancers is making things a bit more interesting than the past few years, but I was never one to complain about change.

This is my 9th month working for myself, and being the crazy data driven geek that I am, I want to take a close look at the highs and lows of the past year. The key to interpreting any data set is fully understanding what you’re looking for, and what metrics are important. It’s like looking at someone’s social media following and not their engagement. While both metrics are important, one is a far better indicator of the value of that brand than the other. The same type of finance analysis should be applied to any business, especially one is in the process of growing. Doing a finance analysis gives you the same type of feedback.

Key indicators to look for:

Overhead costs- This is an important section because it took a while to figure out a system for doing things. This area encompasses all my travel. meal, and hardware expenses. Some of them were one time charges and necessary, and other were foolish purchases.

Staffing cost- I keep this separate from my overhead cost, although they belong because my payroll administrator handles most of it. I did, however, keep a detailed tally of all the projects that my team worked on, and how they contributed. I normally employee freelancers, so scaling up and down is a bit easier.

Project Costs/Deadline. I typically charge per project. This turns out to be a win-win for both my clients, and myself. I look closely at the data set to make sure that this is still the best way to go, or would a hybrid approach work better when it comes to taking on new projects.

Regardless of whether you work for yourself, run a blog on the side, or have a full-time, closely analyze your financial year sets you for success the following year, and helps you prepare a well crafted budget.