Abraham Lincoln once said, “The best way to predict the future is to create it.” Wouldn’t it be ideal if you could predict the financial success of your business endeavors? You might be able to if you keep track of 10 important financial numbers every day.
As a business owner, your days are filled with a countless amount of tasks that keep your business on track. When you do finally take a break after work, it’s probably not to review your financial statements. However, that can be a serious mistake. While it may not be your favorite post-work activity, it’s critical to keep a close eye on the numbers that can help you predict the overall success of your business.
Without tracking a few pivotal financial figures, you aren’t aware of how much is being spent and what may be trimmed, and as a result, you can’t reduce overhead costs or expenses. There's always time to raise net profit, so each month, you should input your transactions and use the resulting figures to make wise business choices moving forward.
To get the most out of your money and free time, our McAllen business coaches at ActionCOACH RGV are briefly sharing five financial numbers every business owner should know right now, but you won’t want to miss our upcoming Facebook event on October 28th where we will dive right in to the details of what these--and other--numbers mean for you and your business.
Managing cash flow gives a different view of the economic state of your business. This figure is done by subtracting your operating expenses from the money your company generates throughout typical business activities. It involves depreciation to your net income and accommodates for working capital such as receivables and inventory.
When your operating cash inflow exceeds your cash outflow, this is a sign that you’re operating in the black. If the reverse is the case, it’s time to pay more attention to your income and expenses.
Sufficient cash flow in your business checking accounts, especially payroll accounts, is imperative. Business owners should always make sure they have enough cash flow to meet all monthly business expenses.
What’s relative to cash flow is your net income, which is also referred to as your net earnings or net profit. This figure demonstrates the result of subtracting all your expenses--such as taxes--from your income.
It's not adjusted for items like depreciation, and like cash flow, your net profit is a solid indicator of whether you're making or losing revenue.
This figure can be found on what's commonly called your P&L statement, which is a snapshot of your company’s income (sales and revenue) minus expenses throughout a quarter, every six months, or yearly.
Being aware of your company’s profit and loss over time lets you project earnings and make realistic plans for the future, both short-term and long-term.
Generating sales is the reason most entrepreneurs operate small businesses, so this figure is a given on the list of important numbers. Paying close attention to sales is vital, as a drop could deem a warning sign for trouble.
Note that it’s equally as crucial to watch when sales are up. Evaluating why business is thriving at the time your company's on an upward trajectory is easier than trying to determine that later. Responding swiftly to a boost in sales also gives you the option to determine what is necessary to sustain that growth.
Business owners should know exactly how much it’ll cost them to buy their goods along with what they'll need to sell those goods or services in order to make a profit. This is an especially key number for restaurants and other retailers. When you figure out your price point make sure to take into account all overhead costs, including utilities, payroll, and sales tax.
While it’s important to get the hang of keeping track of financial numbers, so is your time and freedom as a business owner and entrepreneur.
Knowing which numbers to pay attention to can give you a better idea of how to manage your money, time, and freedom. Discover the 10 most important financial numbers you should know every day when you join ActionCOACH RGV’s free Facebook webinar.
Accounting isn’t just for April 15. Learn more about the most important financial numbers for business success by attending ActionCOACH RGV's FREE Facebook webinar on Oct. 28th.
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