Written by Tim Sernett, Accounting & Finance Advisor for SMBs | Owner-Financial Optics Inc | Entrepreneurship enthusiast | Dad | Sports nut

As a business owner you absolutely have to know your numbers. As Marcus Lemonis (successful entrepreneur and CNBC “The Profit” show personality) says, “If you don’t know your numbers, you don’t know your business!”

I would add to that, “… and before long you’ll be out of business”.

So many businesses get into extremely tight or emergency cash flow situations. Interestingly enough, it often seems to come as a surprise to the business owner. Far too many businesses are on their way OUT of business and the owner often doesn’t even realize it until it’s too late. Why? Because they don’t know their numbers!

The shame of it all is that it’s just not that damn hard to know, understand, and use your numbers to build a better business.

It’s your business. It’s your responsibility to all who depend on the business (your family, team, customers, and vendors) to run the business with the necessary profits and cash flow. That’s all there is to it. YOU chose to be a business owner, so YOU better know your numbers and know what drives your profitability and cash flow.

Of course to know your numbers the business must have a competent bookkeeping, accounting and finance function. That can mean many different things, depending on the size and complexity of your business.

Know Your Numbers

So what do you need to know in order to actually know your numbers?

The following is by no means all inclusive (in fact, it’s sort of bare bones minimum, but it will get you pointed in the right direction):


Gross profit margin – What is the minimum gross profit margin we need on every single sale today in order to meet our profitability and cash flow goals?

Every day small business owners make decisions to cut prices or give special discounts in order to make the sale.

And that’s OK, but only if you understand what it’s doing to your margin on that particular sale and how it affects the businesses profits and cash flow overall.

Breakeven point – Every business owner should have a feel for their sales breakeven point. The breakeven point is the sales level at which the business has covered all its costs and expenses.

So the next sale over the breakeven point will put the business into a profitable state. At Financial Optics, we typically determine the monthly sales breakeven point for our clients. Taking it a step further, many of our clients break that down into daily sales breakeven points, so they understand how the business is doing on a day-to-day basis.


Cash position and cash needs. What is the business’s current available cash and what are the required cash disbursements this week?

Up-to-date and accurate vendor ‘payables aging’ and customer ‘receivables aging’.

Summary of very near term larger cash flow movements (i.e. the loan payment is due next Tuesday, our largest customer will be paying us this Friday, bi-weekly payroll is next Monday, monthly payroll taxes are due in 10 days, etc.)

Some sort of sales report so you have a feel for how you’re doing this week and month-to-date against breakeven points or sales goals.


Financial statements – Income statement, balance sheet, statement of cash flows. I realize that understanding financial statements takes some coaching and/or experience. We help our clients read financials all the time. The main point here is to gain insight every month regarding gross profit, net profitability, cash flow, and liquidity. The focus here should be more on the overall financial health of the business…not just top line revenue.

Actual results vs Forecast – Comparative reports. A reliable financial forecast is the next level of knowing your numbers. If you’re actually using a financial forecast to help make big decisions and drive profitability and cash flow, then you’re way ahead of 99% of your competition. A reliable financial forecast will help you see the financial future of your business.

Now, depending on your industry, there are many other KPIs (key performance indicators) you should be analyzing other than gross profit and breakeven point.

With a competent accounting and finance division, knowing your numbers isn’t difficult or time consuming. There’s really no excuse for not deeply understanding your numbers. It just makes sense for you to have a daily top-of-mind sense of gross profit and breakeven.

  1. Take just five minutes a day to review daily, weekly and month-to-date sales levels.
  2. Also take 15-to-30 minutes a week to know your current cash position and cash needs.
  3. And, finally, take an hour or two a month to review financials and business performance against forecasted goals.

It doesn’t have to be hard. Know your numbers. Drive your business forward.

Need help understanding your numbers or putting a process in place to stay on top of them? We’re happy to help. Give us a call at 913.649.1040.