Updated: Apr 6, 2020
Most successful business owners are great at what they do. They know their product, they believe in it and can effectively create value for their customer and subsequently generate revenue.
There are a number of reasons why people go into business for themselves – they see a gap in a market, they understand and are experts in the product they sell or they simply prefer to answer to themselves. The list is endless really. One thing that sometimes gets forgotten – for whatever the reason you are in business – if you’re not making money, a profit, then it won’t be long before you’re out of business.
You could be the most effective salesperson, have the greatest product in the world – but if you don’t understand your profit margins, overheads and cash flow, and monitor them continuously, you are at serious risk of not having a viable business in the long term.
Most businesses leave the numbers to their external accountant providers and a bookkeeper. Generally, they look after the compliance matters, make sure you are paying your taxes, do the end of financial year statements, reconcile the accounts, pay the bills and pay your staff. But your numbers contains significantly valuable information than these basics. By looking at trends, understanding how much money you are making, where your cash is going, and in what areas of the business – gives you clearer guidance to what you need to do in the future to shape a vibrant and sustainable income stream.
You could be the most effective salesperson, have the greatest product in the world – but if you don’t understand your profit margins, overheads and cash flow, and monitor them continuously, you are at serious risk of not having a viable business in the long term
In today’s digital world, technology is connecting the numbers for businesses faster than ever – we have automated and live access to our revenue, expenses and cash. If you don’t, then you are being left behind. Online cloud accounting systems now make it far easier for business owners to access this precious data to ensure they are making the best business decisions for the future, right now. But a lot of businesses are not using these systems, or if they are, not to their full potential. Purely because they don’t know the capability of what is available to them, or don’t have the human resources to put the processes in place to capture it.
Think of your numbers like the food you eat. We all have to eat. But some people use the food they eat more wisely – they make sure they are eating nutritious wholesome food that nourishes their body in the best way possible. They limit their sugar, processed food and alcohol intake (okay, maybe they have a glass of wine or two).
Think of your numbers in the same way, you know you have to use them – but make it count by maximising the way you use it (planning), what you use if for (nutrition) and limiting the unnecessary expenditure (junk food).
You do not have to be an accountant to understand your numbers, just like you don’t have to be a nutritionist to eat healthy food. You just need to understand a few key metrics and trends and review them regularly.
Set some time aside today to really think about what data could help you make better business decisions, and ultimately, make you more money. You may find this data is more easily available and ready to use than you think.