The trap of not knowing your numbers- your financial reports- is that you are building your business on a shaky foundation at best, and you don’t even realize it. A business that can be knocked completely on its rails with a couple of bad deals, a couple of slow sales weeks, or a month of slow collections. And when that happens and you’re suddenly talking to a bank about opening a line of credit to pay the bills and make payroll next week- well, it’s probably too late.
In order to grow a business with confidence and certainty you must live in the facts of your business.
Otherwise you’re making decisions about your business based on hope:
– I hope there’s enough money to pay all our bills and clear payroll next week
– I hope that sales increases will solve our cash flow issues
– I hope all our customers pay their invoices on time
– I hope we can afford to hire the new employee we need
– I hope our marketing is driving enough leads to meet our growth goals
– I hope we are hitting the gross profit margins needed
Your financial statements and KPIs report the facts of your business.
Our blog post Know Your Numbers provides a great summary of daily, weekly and monthly numbers to focus on. There are some universal business numbers you need to know, and inside of your business there are some specific KPIs that should be tracked, understood, and used to improve your profits and cash flow.
Knowing your numbers means you are tracking the facts.
Accounting is the language of business and is the only way to truly understand the results of your business. The facts must prove there is enough positive cash flow to sustain the entity, even if you’re a non-profit.
Living inside the facts of your business also means having the processes and systems in place to properly track the numbers.
If the bookkeeping and accounting is not set up properly, it makes it difficult to know the numbers. If things aren’t set up correctly, it’s hard to know what you are tracking, if it’s accurate, and what it means for your business.
Not knowing your numbers means you are operating a business not knowing if there will be enough profit and cash flow to cover your costs and overhead.
With that uncertainty and worry comes bad business decisions, and erratic performance. That stress and worry often starts to bleed over into other areas of your life, like family and health.
Nobody wants that.
Choosing to know your numbers and keep tabs on your financial stability (or instability) will give you certainty about where your business is headed. There comes a confidence that your strategic plans will result in a business that is financially healthy and built to survive and thrive. Look for more resources here on the what, why, when and how of knowing your numbers. Click on GET STARTED if you’re ready to learn more about the easiest way for you to start to know and understand your numbers.