Why You MUST Know Your Numbers for Business Success

If we collective a dime every time a client told us they don't know their numbers, we'd be rich!  

But seriously, if you have followed the advice and hired an accountant to take over the finances of your business, now you can rest easy and focus on doing what you do best and never worry about that side of things again, right? While this statement feels great, there are still a few financial details about the business that every business owner should be aware of no matter who is managing the finances.
 
Cash Flow
Keeping an eye on this number will help you have a constant finger on the pulse of your business. If the amount of cash flowing out starts to outpace the amount of cash flowing in, some adjustments need to be made and quickly to keep things running.  Cash is the lifeblood of a business! Your business cannot stay afloat long with miles and miles of accounts receivable and promises to "pay later."
 
Net Income
This number is closely tied to your cash flow and is basically what is left over after everything is paid. To ensure the health of your business you want to make sure that this number is always positive and better yet, steadily growing!
 
Gross Margin
This is the number that is left after you subtract operating expenses from what you are charging. Whether you are a service or product-based business, you want to make sure that you are frequently looking at and adjusting your rates based on this number. Ideally, you want to find that sweet spot where you are charging enough to cover expenses, make a profit, and be competitive.
 
Profit and Loss
This is a snapshot of the financial status of your business at a given point in time. Knowing and being able to reflect back on this information will allow you to predict future performance and budget accordingly.
 
You do not have to be an accountant to have a grasp on the financial health of your business at any given point in time. Simply familiarizing and keeping up to date with these four numbers will give you a picture of where you stand and where you need to make adjustments. 

Need help with your business plan and whether it's set up for success? Reach out to our office today for help.

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