How Well Do You Know Your Numbers?

Business is, without a doubt, a numbers game. Why did you build your business in the first place? Whatever your reasons may be, it was ultimately to make a profit. So, without your fingers on the pulse, how could you possibly track your success? Your financial numbers make everything going on behind the scenes visible. They will tell you whether your sales income is on target, whether your costs are under control and your predicted financial success. This information can help you to make informed decisions that have the potential to make a considerable impact on your business and its growth. 

Owning a business is a difficult task and, with general day-to-day activities taking over a large percentage of your working day, you might find that the financial strategy of the business naturally takes a backseat. Well now you have no excuses. The next time your business coach puts you on the spot, enquiring about your current turnover, you will have all the answers. You should always be prepared for these kinds of questions and keeping your numbers up to date will ensure that you are. Keep in mind that you can’t manage what you can’t measure! There isn’t a set of rules that apply to all businesses and, consequently, it can take time to learn which of your numbers are most significant. What better way to spend our new found time than to get to grips with our numbers?

Although we recommend discussing the best numbers to measure for your business with your trusted advisors, it would do no harm to familiarise yourself with the following seven key financial numbers:

Cashflow 

This offers a bird’s eye view of the economic state of your business. Cashflow refers to the movement of money in and out your business, in terms of income and expenditure. 

Profit and Loss

This statement gives an indication of the business’s income minus the expenses over a period of time, enabling you to predict earnings for the next accounting period.  

Net Income

Closely related to cashflow, this is a good indicator of whether your business is making or losing money. It is calculated by subtracting all expenses, including taxes, from gross income. 

Sales

One of the most important aspects in business a sales and so this number should be monitored closely. Without generating sales, your business cannot improve its financial situation.

Gross Margin

This number reflects how much money remains after the cost of your product or service is subtracted from the selling price. If it is relatively small, you might want to consider increasing your selling price.

Accounts Receivable Ageing 

This outlines all of your business’s ageing debtors. Regardless of how many sales you are making, if you have a high number of debtors, there is less money immediately available to pay salaries and expenses.  

Cost of Sales

This tells you the exact cost of delivering the products of services you offer, taking into account all expenses such as employee time, manufacturing, rent etc. 

Help Yourself

We understand how overwhelming and time-consuming it can be to sift through your financial statements, but putting it off will only make it harder for yourself down the line. Little and often does the trick. And knowing which of your numbers to look at will save you heaps of time and effort.

With this information, you’ll be able to make informed decisions about redrafting your budgets, cutting costs and planning ahead. We can help you with all of this and more. Simply get in touch or join one of our webinars.