If you ever have problems managing the money and numbers side of your business then…
Numbers Surround You but You Can Take Control
Numbers are used for quantities, for money, for time, for height and weight, for food packaging, for distances and the list goes on.
Yes, numbers are everywhere, no matter where we turn or what we do, we are surrounded by numbers. Many of these numbers we take for granted, they’re just part of normal, everyday life, whilst other numbers we find overwhelming, perhaps even try to ignore them in the mistaken belief that if we don’t think about them, they won’t be so bad. But in the overwhelm and burying of your head in the sand, you make it worse.
It is in knowing the numbers, understanding what they mean and taking action to change them that you eliminate the overwhelm and gain control over the numbers.
I’m talking about your business numbers. You know the ones. The long lists of numbers on a couple of pieces of paper that says at the top of the pages Profit and Loss Statement and Balance Sheet. And to add to the confusion, there’s assets, liabilities and equity which just add to the confusion. You may even get a third piece of paper called a Trading Statement … And that’s not to mention the Aged Receivables and the Aged Payables reports. Confusion and overwhelm reign supreme.
Over the years, I’ve found the majority of business owners look at their bank balance and not much else.When times are difficult, a daily check of the bank balance is made. If there’s money in the account, a payment will be made to whoever has hassled the most for payment from their suppliers, or they will be keeping an eye on the balance because wages are due at the end of the week.
The better method is to prepare a 12-week forecast of receipts and payments.Whilst I love technology and am a self-confessed geek, I go old school on this and use a spreadsheet. I’ve taken my finger off the numbers in my business in the past, buried my head in the sand hoping that it would just miraculously get better. It didn’t; until I put in place my spreadsheet. I’ve been using it for years now myself, and my clients use it too, and we no longer check the bank balance daily and stress about how we’ll have the money to pay the bills.
In addition to the spreadsheet, review the Aged Receivables report on a daily or weekly basis.This will allow you to see which customers or clients owe you money and particularly those where the invoices are overdue. Overdue invoices need to be chased up with a phone call or an email. Don’t shy away from this, make it a priority each week and you’ll get money in your bank account more quickly.
Income is an important number to focus on too, but beware. Income is only as good as the profit you make on it. You need to make sure that you have the right profit margin on the different products and services you sell otherwise you may find yourself with good income but still no profit. For more detail on this, check out my previous article, How to identify your most profitable services for growth.
Whether you like it or not, you are surrounded by numbers everywhere you turn.
Focus on just a few of the numbers in your business, the ones that help you to manage the business, and once you’ve got a handle on them, then add a few more numbers to the list, and before you know it, you’ll be able to read the reports too.
“The opinions expressed by Smallville Contributors are their own, not those of www.smallville.com.au"
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