There are some numbers that if a business owner is not aware of them they could find their business in severe financial difficulties. Running a business and dealing with customers can keep owners very busy, but they should also take the time to check out what else is going on with their company or it might all be a waste of time.
Profit and Loss Accounts
Although these are not the only important numbers by any means when your accountants – and you do need a good accountant like Connolly Accountants – present you with your profit and loss accounts you should look at them very closely. Is your gross profit margin as good as it should be? Could you overheads be reduced?
Some businesses find it very useful to have their profit and loss accounts produced more often than once a year and opt for quarterly or half-yearly accounts. This enables them to see what mistakes are being made, if any and helps them to plan for the future.
Cash Flow Forecasts
A cash flow forecast is closely related to your profit and loss account so will probably also be prepared by your accountants. What this does is project what cash will come in and what expenses have to be paid in the next few months. This will help a business owner to see if there are likely to be any hiccups, and maybe let them prepare for it.
Checking out your cash flow forecast will let you have a better idea to expect, and these are often used if major changes are about to happen, such as the introduction of new products.
Sales
Sales figures on their own do not really give a full picture, but knowing if your sales are going up each month could be vital to the success of your business. There will be a number of sales where you know you will break even, and you want your sales to exceed that every month.
Margins
Knowing your gross profit margin is vitally important or you could be selling goods at a loss. Some business are very strict and stick to the same percentage for everything, while others will look at each item and see how much they think they can make. As long as overall the gross profit margin is as high as you want it to be, either method will work.
Know How Much Stock You Have
Having an inventory of your stock will let you see what items are selling best, and what you need to reorder. If something is still sitting on your shelves after a few months, you should probably put it on special offer and use the cash to buy something that sells much better. Having too much stock can affect your cash flow figures, and not enough will lose you sales.
The Boring Figures
Figures can be boring, there is no doubt about that, but without them, you will never know how your business is doing. It can be much more exciting to be making sales, but you need to know your numbers so that you know if continuing in business is worthwhile.