In business, knowing your numbers is vital in survival and moving forwards
Every business, whatever the size, deals with numbers. How many sales transactions do you need in a month to make a profit? How much cash flow is required to maintain financial stability? Where do the expenses come from? Payables and receivables, all that kind of stuff.
Why it’s important to know the score
As a Business Coach, I always tell my clients that they need to know the numbers so they can effectively exercise caution with their financial decisions. It’s like any game — if you don’t know the score, you don’t know if you’re winning or you’re losing. And if you don’t know if you’re winning or you’re losing, there’s really no point in playing the game.
The last thing you would want to do when running a business is to fly blind and take risky actions because you have no idea where to start. If you’ve got the numbers to back up your decisions, you know exactly where to go and what you’re aiming for.
Start with re-learning the basics of finance
I’ve found that it really helps if we decide to educate ourselves about the many aspects of finance. Here’s a good place to start: if you don’t already know how, you might want to learn how to read financial statements. This is one statement will tell you all about your money — where it came from, where most of it is going, and where the rest of it is right now.
Try to get a fundamental understanding of the critical aspects of financial statements: the cash flow, the balance sheet, the income statement, and all those other financial reports. You don’t have to master these concepts, but understanding them will make it easier for you to make financial decisions in the future.
Make sure your numbers are updated
Aside from knowing your numbers, it’s also important to make sure our numbers are up-to-date. For my clients, my recommendation has always been to have their numbers updated every month. I think there’s no point in looking at your accounts at the end of the year when there’s already nothing you do about it. That’s why it should be a monthly report, except maybe for those in faster moving environments where it should be weekly.
Numbers need to be up-to-date so you can compare them against what you forecast to happen. This helps you make the necessary adjustments as you go along.
It won’t hurt to seek professional guidance
I know you take your personal finances and entrepreneurial finances seriously, and that you want to make sure you’re doing the right things before it’s too late. When it comes to running a business, one thing is certain: at times, it will feel like you can’t keep up with everything. Financial management can be difficult, and it’s not an uncommon feeling for you to become overwhelmed.
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