Do you know your Numbers...?

As a young, new Operations Manager running a manufacturing centre in Bristol in the UK, I got a 'phone call from the Group Accountant reminding me to submit some numbers to her for month end...

These numbers included;

1. Accruals...
2. WIP Stock...
3. SDNI Stock...
4. Bad Debt Provisions...
5. Projected Contribution...
6. 90-Day Cash Flow...
7. GP and Margin Trend Report...
8. Shut down date...

I simply said...

"Yes of course, I'll have them over to you by the end of the week..."

Putting the 'phone down, I looked at the list of requests on my notepad and realised I was out of my depth...

I recognised some of the terms but had no idea how to calculate them, let alone use them to run the business...

I remember panicking a bit - surely I should know this stuff...?

So I called a friend and told him what had happened, he came over and took me through all the numbers, how to calculate them, understand them, and use them in the business...

Then, I booked myself onto a college course to learn all about the gobbledygook that Accountants talk about, understand the terminology, and get to grips with the language of business...

Bought some books, talked to my boss, took the accountant out for lunch and started to understand...

I'm still not an accountant, but talk to me about Ratio Trend Analysis, Margins, Prepayments, Accruals, EBITDA, Cashflow, and Balance Sheets and I'll hold my own...

I still find that too many managers and owners either don't understand the numbers or they simply glaze over at the sight of a P&L or Budget and ignore them...

Richard Branson famously didn't know the difference between Gross and Net Profit in his business...

Plus, it is still true that many Accountants talk in coded language with the sole purpose of confusing us in order to establish the superior knowledge high ground and tell their colleagues how dumb entrepreneurs really are...

So, is it important to know the numbers...?

The unfortunate answer is yes...

We don't need to be Accountants, but we do have to understand how our company works, what the numbers tell us, and how to take decisions accordingly.

72% of people can't explain in one sentence the difference between Mark Up and Magin for example...

So do you have to go to Night School and study a course...?

Bluntly - yes you need to do whatever it takes to get a grip on the language of business.

Do an online course, go to a Workshop, and talk to an Accountant that uses short words and avoids using Net Present Value and Discounted Cashflow as conversation openers...

Buy a book - Accounting for Dummies is a good start...

Get a Co-Pilot to guide you - ask me if I know any good ones...??

Then decide what numbers you need to measure in your business - and what reports and predictions you need to have...

Here's a very basic list of some of the essentials you'll likely need;

1. Budget
2. Cashflow forecast
3. Monthly Management Accounts
4. Balance Sheet

For specific numbers to keep an eye on, it depends on your business but here are a few to think about...

1. Break Even point.
2. Sales
3. Gross Margin
4. Net Margin
5. Debtors, Creditors, and Cash
6. Stock valuations and fluctuations
7. Accruals and Prepayments
8. Order intake
9. Conversion Rates
10. Retention Rates

Of course, there are loads of others to choose from, but build yourself a dashboard of the key numbers and use them to make your decisions...

And if you want some templates or help - just drop me a note...

PS - EBITDA = Everything Bought At Tesco Doesn't Apply...