The importance of keeping score
The importance of keeping score
Financial analysis of your business performance each week or month is essential to running a successful and profitable business. It often isn’t seen as the most glamorous of topics and most commercial business owners prefer focusing their time on activities like business strategy or marketing. The truth is though, the financials feed in wholly to every possible aspect of your business and understanding them in detail can help lay the path to your success. What should you be doing to keep score of your business performance?
Do you want an average business?
When meeting with my commercial clients and discussing financial reporting I ask “Do you want to run an average business or do you want to be successful, profitable, able to invest well and retire early?”
The answer is of course always the same!
The reality is though that only a handful of commercial business owners have a key focus on assessing what it is they need to do in order to reach their goals and continue to grow.
With accurate financial analysis, reliable systems and good guidance your business can go from average profits to super profits in a structured, methodical and reliable way.
You can’t manage what you can’t measure
Past performance tells the story of what has happened so you can learn from those lessons and mirror it for the future.
Understanding the way income and cash flows through your business is essential to keep score and to plan ahead. Without a robust, reliable system, this process becomes difficult.
Controlling costs is also important, so your system needs to be detailed in its analysis, as decisions may depend on knowing the finer detail.
The bottom line is though that whether it relates to income, costs, cash, debt, staff or any other aspect, if there is no means of measuring it, there is no means of managing it.
Which statistics should you be tracking?
Generally working towards increasing income is where the “cream on the cake” lies. However, it is important to track both income and costs for a balanced approach to your business finances.
Try keeping score of these Key Performance Indicators:
- Daily, weekly and monthly income trends – to highlight days in the week or month that are better or worse for business. Some large commercial businesses can even analyse hourly sales.
- Cumulative income to date within the financial year – for example, income to date from April to October compared to the same period the year before.
- Income to wages % – to see how productive your workforce operates and to track one of the business’s bigger costs.
- Gross Profit % – to ensure the Direct Costs of making sales is reasonable. A broad figure to aim for is two thirds of income, so 66%.
- Net Profit % – to ensure overheads are being managed. A broad figure to aim for is one third of income, so 33%.
Figurit can help you keep score of your business finances by introducing a reliable and efficient system and also assisting you with the interpretation of the figures. Call today to find out more about our bespoke service.
T: 020 7376 9333
E: info@figurit.com
