How Understanding “Numbers” Can Help Your Small Business
There are multiple numbers all business owners should be aware of at all times. This is critical for everything from daily operating, to expanding to doing things like getting traditional or accounts receivable financing. Keep these numbers in mind and ensure that they are always where they need to be.
Your Net Income
Your net income and business cash flow work together to help you determine how well your business is doing. To determine your net income, you want to take all of your business income and subtracting your business taxes and expenses. The figure that you are left with is your net income. Keep track of your net income over time and make sure that it is constantly increasing. As long as it is increasing, you will know that your business is steady and that you are not losing money.
Business Cash Flow
Your cash flow tells you how your business is doing. If the numbers decrease, you should start making changes to level them out and improve them. Things like accounts receivable financing and adjusting invoice payment terms can help to improve your cash flow. When you are assessing cash flow, you want to look at all of your business money stores, including your payroll and all business checking and savings accounts.
Evaluate Your Sales
Your sales are one of the most critical numbers for you to know. You need to see a constant rise or at least a steady pace to ensure that your business is doing well. When you regularly track this number, you can see decreases and increases. Look at these and at what was happening when they occurred. This will help you to make changes to help grow your sales which ensures that your business is working with consistent growth.
Know Your Profit and Loss Information
Profit and loss is something to evaluate every few months to see where you are spending money and where you are making it. When you know this information, you can better create goals for your business and project your earnings. Pay particular attention to these figures at the end of the year because it offers a broader picture about how your business is doing.
You should know all of these numbers because they will help you to determine how healthy your business is. It also helps you to institute new things within your business, such as accounts receivable financing or knowing when you can comfortably get new equipment.