Knowing your numbers equals a realistic growth strategy.
Are you a busy person working in your business day to day and just managing to keep your head above water?
This is typical of many owner managed businesses; you’re so busy working in your business you soon lose track and stop working on your business, despite wanting to grow and increase your turnover.
If I was to ask you if you were on track to reaching you sales goal for the month, what would your answer be? Is it as simple as looking at last month and adding a little? Is it as simple as looking at the month so far and hoping the trend continues? No, it isn’t as simple as either of those.
You no doubt sat and wrote a business plan and added some financial projections because the bank asked you to right at the beginning. Have you even looked at it since? Have you measured your performance against your projections?
The one key task you should undertake on a regular basis is MEASUREMENT
Cash flow statements: You spent time writing your financial projections based on guess work and research but have you added in an ‘actual’ column to record and analyse how you are actually doing?
Accounts receivable: How did you forecast your projected sales? How accurate were they? Can you do anything to improve them?
Accounts payable: You projected your purchases based on your sales no doubt, but are they still in line or have your sales missed the mark but your purchases have increased? Keeping a track of your purchases against your projections will help you maximise your profits, leaving you more money to reinvest back in to the business.
Debt: Did you take out any lending during the last year? Are your profits sufficient to pay it off early saving you interest?
Equity: As Debt above, did you personally lend the business money at any stage? Are your profits sufficient to take some or all of that back?
How is best to analyse and measure the factors above?
By working with your accountant on a regular basis and producing concise management accounts you will have a visual report to refer to, allowing you the freedom to develop and grow the business.
Your accountant will prepare an Income Statement and Balance Sheet and some will add your actuals to your projections, that way you’ve measured your performance.
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