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Understanding and Tracking Your Business Finances

15 Mar 2021 7:29 PM | Ali Everhard (Administrator)

Finances. Such a dreaded word. It is such a dreaded word that a lot of business owners (and people in general) choose to avoid that word and any tasks that come along with it. Even though we try to avoid it, we know that keeping track of finances is essential for business owners to do! It is how they know where their money is coming from and where it is going to which helps them to continue to financially grow! You might be thinking ~ I don’t fully understand my finances, but I do know that I am making more than I did last year ~ so I must be growing as a business! Well, that is partially true. Making more money is, of course, a good indicator of a thriving business, but you might also be spending more in places you didn’t think you were. Getting a good grasp of your finances, creating a budget and a forecast for your business will help you get rid of costs that you might not actually need.

Women’s Council of Entrepreneurs has created a Finance Tracker so that you can get a monthly estimate of what you spend, what you make and your monthly financial forecast. You can download this worksheet for FREE right HERE! And please continue reading so you know how to use the worksheet appropriately. 

If you have already printed out the WCE Finance Tracker you will see that that there are 3 columns and 5 rows in the first box. The columns are labeled monthly forecast, monthly actual, and variant. Our first task is how to find the numbers you will be filling out in the “Monthly Actual” Column on the Worksheet. We will then explain at the end how to figure out your "Monthly Forecast" for next month! Let’s begin on explaining each row.

When looking at the WCE Finance Tracker you will see there are rows for your Monthly Income, Cost of Goods Sold, Gross Profit, Operating Expenses, and your Net Income. And you may already want to give up, and believe us we don’t blame you! Going through finances is never fun, especially when you can never remember what all of these terms mean! But, don’t worry! WCE is here to help! And below is your cheat guide!

First up ~ what to put in the INCOME section of our worksheet.  Investopedia defines Income as: “money or the equivalent value that an individual or business receives, usually in exchange for providing a good or service or through investing capital.”

Simple terms:

INCOME is the amount that you made for the month! Yay! This number is BEFORE any cost is taken out or any expenses at all. Income is the total number of sales you made. If you made $4,321 in sales than that’s the number you put in the monthly Income section. It doesn’t matter yet that your supplies cost you $333, that’s the next step.

Now for the next step! Cost of Goods Sold section!  Investopedia definition of Cost of goods sold (COGS): “The direct costs of producing the goods sold by a company. This amount includes the cost of the materials and labor directly used to create the good. It excludes indirect expenses, such as distribution costs and sales force costs.”

So, the COST OF GOODS SOLD section will hold a negative number and will be the total amount of money that it took to create your goods. If you are service company you most likely do not have any cost of goods.

Moving on to the Gross Profit section. This one is fairly simple, but we want you to know what Gross Profit means! According to Shopify “The gross profit of a company is the total sales of the firm minus the total cost of the goods sold. The total sales are all the goods sold by the company. The total cost of the goods sold is the sum of all the variable costs involved in sales.”

GROSS PROFIT can easily be explained as subtracting monthly cost of goods from your monthly income. Easy Peezy. 

OPERATING EXPENSES is next. This one is a bit trickier only because you will need to think of all your monthly expenses outside of the cost of goods. Investopedia defines Operating Expenses as “Costs that are associated with the maintenance and administration of a business on a day-to-day basis. Operating costs include direct costs of goods sold (COGS) and other operating expenses—often called selling, general, and administrative (SG&A)—which includes rent, payroll, and other overhead costs, as well as raw materials and maintenance expenses. Operating costs exclude non-operating expenses related to financing such as interest, investments, or foreign currency translation.”

This might seem a bit overwhelming, but again never fear WCE has you covered! On the Finance Tracker Worksheet we also added a second box to total up your Costs called the “OPERATING EXPENSES BREAKDOWN”. We have items that are common operating expenses, as well as, blank sections you can add custom costs you may have your business!

Once you have you have totaled all of your operating expenses items together from the monthly “operating expenses breakdown” you can log that total number to the Operating Expenses ssection in the upper box. Again this will be a negative number.

The last section of the WCE Finance Tracker is the NET INCOME. CFI defines Net Income rather perfectly: “Net income is the amount of accounting profit a company has left over after paying off all its expenses. Net income is found by taking sales revenue and subtracting COGS, SG&A, depreciation, and amortization, interest expense, taxes and any other expenses.”

So, to get your Net Income simply take your Gross Profit and subtract the operating expenses from it! Now you have what you ACTUALLY made this month!

That wasn’t so bad, right?!

Well, we’re guessing you are looking at your worksheet and you’re maybe wondering ~ "ok, now what is with the “monthly forecast” and “variant”?!"

Creating a monthly forecast is essentially making an estimate of what you could make and spend in the next month.

You can find your monthly forecast for the upcoming months or you can skip it, it is up to you. We suggest you do it since it helps you understand your finances even more and gives you a visual of where you are actually spending your money and if you are using your money wisely. Don’t know how to create a forecast? That’s ok. You can get one in 2 simple steps.

  1. Look back in your files and gather the last 3 months of Income (remember this is before cost of goods or operating expenses). 
  2. Take those three numbers and find the average by adding them together and then dividing the total by 3. 

The number you get is a indicator of what you can put in your next month’s Income Monthly Forecast. You can also look back on past years and see if the month you are forecasting is usually a good month or bad month for sales and adjust accordingly.

Do the two steps above for Cost of Goods Forecast as well so you can take your Cost of Goods Forecast total and subtract it from your Income Forecast for your Gross Profit Forecast.

To find the Operating Costs Expenses Forecast do those same steps above, but for each item in the “Operating Expenses Breakdown”. Total those all up and add it to the upper box. Some of these numbers are set each month so this could be fairly easy. But, if you have one that can be adjusted, try it for a month or two a see how it goes. For example: your marketing and advertising, for a couple months add more to (or take away some of) your budget and see if it affects your Net Income! It's a good way to see if you need adjust your spending.

And finally to find the Net Income Forecast you will (you guessed it) subtract the Operating Costs Expenses Forecast from the Gross Profit Forecast and your difference is your New Income Forecast!

And lastly, your monthly VARIANT is the difference behind your forecast and your actual. Take the total and fill in your monthly variant section. The Variant for the Operating Expenses Breakdown box works the same way.

We know this is a TON of information for some people. If you have any questions please don’t hesitate to reach out to us at If you found this useful please go through our other Articles where you can find more helpful tips and more FREE downloads. And please head over to our Upcoming Events or our Shop to see our upcoming & past workshops and other events that will help make your the best business owner you can be! We always have your back here at WCE!


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