There is a saying that cash is king and cashflow is queen and it is especially true for entrepreneurs, startups, and small business owners. If you don't keep track of your cashflow, you will have no idea when you will run out of cash. No business can afford to run out of cash and continue to operate on a long term. You won't be able to pay their vendors and employees and will have to shut down your doors. You can't tell if the money you spent on marketing is effective or not. You need to know what your net profit is and where your cash is coming and going. If you don't, there's no way you can know how to increase it.
If you want your business to stay afloat and be successful, you need to make a financial forecast and check it against monthly results, then take actions where necessary. Here are the steps you should take:
Create a financial forecast for your business. Estimate your sales each month, and project what your expenses will be.
Remember that you can't recover lost profits. When entrepreneurs compare their projections with their results find out that they are below forecast, they often comfort themselves by saying that they will make it up the following month. The truth is that you can't really make it up later. A bad month will always be a bad month. Keep that in mind.
Make adjustments right away. If revenues are lower than expected, increase efforts in sales and marketing or look for ways to increase your rates. If overhead costs are too high, find ways to cut back. There are other businesses like yours around. Find out how they are operating.
Think before you spend. When considering any new business expense, including marketing and sales activities, evaluate the increased earnings you expect to bring in against its cost before you proceed to make a purchase.
Evaluate the success of your business based on profit, not revenue. It doesn't matter how many thousands of dollars you are bringing in each month if your margin is very low or even negative. Many high revenue businesses have gone down this way. Don't be one of them.