Understanding the Numbers in your Business

 

It is common to find small business owners who desire a successful and sustainable future for their business, but have no clue as to their financial state. They reckon as long as there is money in the bank account, they are doing fine. Unfortunately, a bank account balance does not tell the whole story of your finances.

In order to make a decent profit, you need to be able to control your finances. By keeping track of the financial numbers will not only help you identify problems, it will also position you to take swift action(s) to improve your business. 

What numbers should you know?

 

·Your current and projected  sales revenue is in a month 

·Your current and projected monthly expenses

·Your break-even point(where your revenue and sales meet)

·Your gross profit

·Your present and projected cash flow

·How much products you need to sell to make a profit

·How much your products cost you 

Keeping track of these numbers will require astute record keeping and periodic evaluation. Every amount the business spends or makes must be documented in the appropriate sub-categories of income or expenditure. With the help of an accountant, these numbers can be used to generate important financial statements such as the income statement, balance sheet and the statement of cash flows. 

The financial statements will in turn provide a yardstick for measuring the progress of the business and should be compared to the overall business goals set.

It is nearly IMPOSSIBLE to run a business efficiently and profitably, if the FINANCES of a business are not KNOWN or UNDERSTOOD.

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