August 30, 2017
It’s important to keep track of how your company is performing, otherwise, your business could die!
From how much you are making in sales, to operational costs and overheads, it’s crucial to know what money is coming, what money is leaving, and for what reasons. Getting the numbers together may seem like daunting tasks at first, but with the right tips and a little diligence, you can move your business forward.
Many people only look at their accounts at the end of the financial year or even 6 to 7 months later when the accountant completes their tax return.
By the time they get a chance to review it, they are looking at last year’s financial report. If there was a need for immediate action, the time has come and gone.
The best way is, getting into the habit of checking your numbers more often – ideally at least once a month.
This enables you to see what is working and make changes quickly without losing both time and money on things that are not working.
Know Your Profit and Loss (P&L)
Your P&L gives a very good overview of the health of your company, and can be tracked easily.
If you have a bookkeeper or accountant doing your accounts, ask them to send a monthly summary of P&L for you.
The other option is that you can track it with an Excel spreadsheet, or any accountancy package so you can generate the reports whenever you require it.
If your accountant uses an online accounts package and keeps it up to date, you can also access it to get the information you require.
Try putting expenses in the categories relevant to you; this will give you a quick and easy way to find a summary of what is happening in your business and you can see what worked and what didn’t.
How Often to Check Reports?
So, how often do you need to look at your numbers – monthly, weekly, daily? Well, depends on what sector you are in, in some industries it is weekly and for some even it is daily.
You should be looking at reports at least once a month. When checking reports, ask yourself questions to get the necessary information quickly.
• How many potential customers did you get?
• How many of them become a new customer?
• Where did they come from?
• How much did you spend to get that customer?
• How much did you spend per marketing strategy?
• How many existing customers bought from you again?
For ourselves we look at our key performance indicators (KPI’s) weekly and focus on the above questions, and full P&L report once a month.
Know Where Your Business is Coming From
When making conclusions and plans based on the reports, consider the 80 – 20 rule.
Probably 80% of your revenue, comes from 20% of your marketing spend. Focus on the 20% marketing strategies that work and ditch the rest.
Profit and Loss is a great tool to see where you are. P&L is about past performance which means you can look at last year’s overheads and see if you can reduce cost.
Once you know where you are, you can now set targets, and start planning!
I’ve met some business owners who go from one extreme to another.
From not knowing a single number in their business, to getting obsessed with creating Key Performance Indicators (KIPs) for everything. These business owners end up spending all their time filling spreadsheets.
There needs to be a balance in everything. Get the basic information to see what is happening in your business and move on to the work!
Think of your research and planning like you would look at a map.
If you want to get somewhere, first you need to find where you are on the map, look at your profit and loss.
Then, decide where you want to go, set some goals and targets.
Finally, commit to the best ways to get there, work on strategies.
From our own experience, our growth saw significant change once we started tracking our numbers.
Take the time to know your numbers and watch as your business moves forward to bigger and better!
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