Why these numbers will make your business look good
By now, you will have realised the business accounting and financial statement is more than for compliance purposes. It’s a dashboard that can reveal the 3Ps of your business. They are:
They are vital insights into the state of health of the business. Having them at the back of your palm, not literally, is handy. But what do these numbers answer?
1. Are you turning a profit?
In a nutshell, it answers the question “is the business generating a healthy return?” Sometimes, small businesses get caught up with revenue. They overlook the cost of producing it. It’s pointless to have a high revenue if you are running at a loss, or at best breaking even. It simply shows the business is not worth the effort and resources put into it.
2. Is your cash flow positive?
It’s the pulse of the business. If your cash flow is positive, that is, more is coming in than going out, you’ve got a healthy heartbeat. You’ll be able to meet your operational expenses. In addition, it’s a good indication of the business’ sustainability.
3. Are you getting paid on time?
A healthy cash flow shows customers are timely in settling their invoices. They value the relationship as well as the quality of your products or services. Above all, it reveals the stability of your customer base. This stability makes it easier for you to plan for growth.
4. Are your business margins healthy?
A healthy margin shows you have done one of two things or both well:
i. The pricing strategy
ii. The cost of production and sales
It’s never too early to work with a cost and management accountant. With their help, you’ll never find yourself over or underpricing your products and services. Either of the latter can do harm not just to your books but your customers’ perceptions of your business.
We’ve highlighted four of the most critical numbers you must have on your dashboard. They deserve your attention. Imagine them to be your car’s gas tank or speedometer. To learn how to use them effectively, call (02) 9810 3222 to book an appointment today!