Know your numbers to grow your business

Do you know how your business is doing on a daily/weekly/monthly basis? or do you wait until your accountant prepares your accounts once a year after the year end?

Your books or figures are signposts to growing your business, making more profit and avoiding cashflow problems. What would be really useful for you to know for your business? I am not talking about the P&L document you may already receive and never look at I am talking about a regular report that will help you stay on target and maximise profit, a document that;

1. Compares actuals against something relevant such as a forecast or the same period last year/last month
2. Includes the key pieces of financial information that lets you decide;
   

• Are you concentrating your efforts in the areas that are the most profitable? (Turnover, gross profit and gross profit % by income stream)
• Are your overheads the right level for your business? (Major overhead costs by category)
• Are there potential bad debts if you don’t take action? (Overdue sales invoices)
• Are you risking supplier relationships or being put on stop? (Overdue supplier payments)
• Are there any spikes in expenditure that need to be managed? (Cash flow forecast)
• Are you on course to deliver the numbers you need? (A forward P&L forecast)
• Is there to help you make decisions about the business (bidding for certain work, major capital expenditure etc.)

Think about what financial information you need on a regular basis to help you understand how your business is doing? And are you able to access that information easily and whenever you want?

For example. As an accountancy firm the key pieces of financial information for us include:

1. Actual invoiced sales versus monthly billing target
2. Our bank balance
3. Any unpaid sales invoices (though most of our clients are on standing order)

Some business are much more complex in that they may have several income streams, costs may be more volatile, the business may be growing or shrinking. For these types of businesses having regular management accounts will be more relevant than a few KPIs like ours.

With the excellent cloud bookkeeping software that is available these days, such as Kashflow, Xero and Quickbooks, it is a lot easier to have relevant and timely financial information whenever you want.

When did you last think about what financial information is key to your business and if you are able to access that information easily? List the key things you want to know to help you improve your business and speak to your accountant about how to create easy access to that information so you can use those numbers to your advantage.