KNOW YOUR NUMBERS, GROW YOUR BUSINESS!
by Sheila Watts
HOW KNOWING YOUR NUMBERS ARE THE KEY TO GROWING YOUR BUSINESS
The finances of your business are important, and not just so you can file your income tax return. Simply put, the numbers tell the story of your business. Paying attention to the numbers can be the advantage you need to grow your business. When you know and understand your numbers, you will find yourself making better decisions, which will lead to growth and bigger profits.
So how do you pay attention to those numbers exactly? First, it is important to understand the difference between income & profit. Income is the amount you make, while profit is the amount you keep. If you are making a lot of sales, that is only a part of the story. If the costs you incur while running your business are too high, the money you are making may be leaving your bank account as quickly as it is coming in. If you only pay attention to your income, you will not recognize when you are spending too much or when your business isn’t doing as well as it could. What ultimately matters is the profit in your business.
The profit of your business is calculated as your total income minus your total expenses. It the number that will tell you when you are meeting your goals. Your numbers will help you get strategic with your decisions so you can drive your profits up. There are a few ways you can do this: Know your income. Know how much you’re making, when you’re making it, and which products or services you’re making it from. When you are paying attention to these kinds of details, you will make better decisions. For example, if a digital marketer has a course to help business owners DIY their marketing, she can use her numbers to determine if she has a more successful launch in the spring or fall if she goes back to her numbers.
- When she sees which launch had more sales, she can then make decisions on when to do future launches to ensure she meets her enrollment goals. - Know your expenses. While costs are necessary in business, keeping an eye on them is the best way to make sure they do not get out of hand and run you out of business. Pay attention to how much you spend, on what, and what product of service it is related to.
The costs you are paying should be helping your business by making more money and serving your customers better. Being diligent in managing your expenses will ensure you meet your goals more quickly.
The best way to manage your profits is by staying on top of your bookkeeping. A solid bookkeeping process will ensure you have the numbers you need when you need them. Bookkeeping tends to be one of the to-do’s that gets put on the back burner. However, your bookkeeping provides critical financial data to guide you in your decisions.
Get a good bookkeeping process in place in your business and stay on top of it. You’ll always have that valuable information available to you to make sure you’re doing what you need to grow your business.
There are a few things you can do to make your bookkeeping easier:
1. Always keep your personal transactions separate from your business transactions. This makes things simpler and clearer.
2. Use a system to track the numbers. While it is recommended to use accounting software, something as simple as a spreadsheet can work.
3. Implement an easy & regular process so you get it done every month. Easy so it’s not a constant hassle to you & regular because the more timely information you have, the better decisions you can make. Schedule it on your calendar so you do not forget.
4. Outsource your bookkeeping to a professional. If you cannot stay on top of your bookkeeping yourself, delegate it to an expert. This will allow you to save the time and hassle of getting it done, but still, get the numbers you need.
If you pay attention to the right numbers regularly, you will be confident in the decisions you make every day in your business. The better decisions you make will result in higher profits and more stable business.
Sheila Watts, CPA