Why You Should Track Cash Flow for Individual Projects

Most businesses have more than one income stream, and not all of them are equally profitable. Here is why you should be tracking your cash flow for each income stream in your business.


Not Created Equal

Most businesses don't have all their money coming in from one source, and that's a good thing. Having diversified interests and income streams at any given time makes sure things keep rolling and cash keeps coming in, even when one particular project or division comes to a grinding halt.

As you work on multiple projects, you'll notice that they are not equally profitable. If you're only looking at one general cash flow statement, you may be missing some important information. Instead, consider tracking the cash flow for individual projects, clients, or divisions within your company.

Breaking It Down

You may have an idea of how individual projects are doing, but it's hard to see the full picture of income, expenses, and time spent when you're right in the middle of doing the work. Instead, set up a spreadsheet and track the cash flow data for a few weeks. Chances are, you'll see some interesting trends emerge.

Certain types of projects, a group of clients, or a particular portion of your business may be much more profitable than the rest. On the flip side, there may be things you're doing right now that eat up a lot of time and resources, but don't end up making you any money.

Narrowing Your Focus

Tracking project by project allows you to pinpoint exactly what's making the money and what isn't. You can use this information to start culling some of the things that aren't profitable and doing more of what is.

Of course, you don't want to put all your eggs in one basket, but focusing on what is working and generating income for your business, as opposed to working on things that don't, is always a good idea.

Maintenance Is Key

Periodically go back and review your current cash flow data, that you now have broken down by project, to make sure you're staying profitable in all aspects of your business. While you're at it, track any new ventures you're starting out in as well. These statements will help you make smarter business decisions and decide what's worth spending your time and resources on.

The same holds true for clients. Tracking cash flow and profitability of individual clients can be valuable as well. Track your top customers and focus on soliciting (a) more work from your most profitable clients, and (b) more clients that are similar.

By focusing on what's working and giving you the biggest bang for your buck (or time) you will increase the overall profitability and quality of your business.

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