Nowadays it’s easy to run financial reports through accounting software. But what then? There are so many numbers to look at; it can be overwhelming. Having business numbers out of date is a fatal mistake business owners fail to give it its due priority. There are many reasons that business owners neglect their numbers, here are some of the most common ones:
• I don’t understand them so why bother?
• Things seem to be going just fine. As long as I’m making money what difference does it make?
• I don’t have the time; I’ll get to it someday.
• I’m afraid of what they will tell me. What if I find out that my business is a failure?
• It’s just me; I’m a solopreneur, why do I have to keep track of the numbers?
• I just don’t know where to begin.
- Financial difficulties
- Employee turnover
- Government regulations
To help you get started, I will list here few of the important business numbers to make sure to keep up to date and examine constantly:
Profit is “the bottom line” for business. Profit (also called “net income”) tells you how much money you have earned after expenses are paid out. This is a great place to start to see how your business is doing. As a business owner, stay focused on this “bottom line” to make sure you’re earning the money you want.
#2 Trend in Expenses
“Total Expenses” is a line in the Profit & Loss Statement. Look at this total and its trend over the last 12 months. Compare the expenses trend to the trend in “Total Revenue.” Make sure your expenses are not growing faster than your revenue.
#3 Accounts Receivable
Accounts receivable (sometimes abbreviated “A/R”) is the fancy way to say “money I’m owed.” This is the sum of your unpaid invoices, and it appears as a line in your Balance Sheet (another basic financial report).
#4 Profit per Customer
Not all clients are created equal. Financially speaking, some are much more lucrative than others. However, don’t make the common mistake of thinking that the best clients are the ones who pay the biggest fees. The best clients are the ones who generate the most profit. It’s extremely important that you look at your profit per customer (or per project). This number is typically not in your accounting software, so you have to do a quick calculation at the end of the project.
#5 Number of Client Prospects
Always keep an eye on the number of prospects you have in your client pipeline. The only way to grow your list of prospects is to stay focused on marketing, even when things get busy, so you can create the growth you want.
Set a Schedule to Track Your Numbers
In order to stay on top of your business, so it will grow as fast as possible, I suggest looking at your key numbers on a monthly basis.
Share Your Thoughts
What is your experience tracking these numbers? What difficulties you face with your numbers? Are there other numbers that are critical for your business? Share your thoughts, questions, and successes with John https://johnstringer.com.au/contact-john/