Accounting software will solve every figure for you to easily generate reports at the end of the week, month or year. Once you have these figures, what then? Numbers are definitely confusing and overwhelming. Do these numbers determine the health of your business? Can you conclude the progress of your enterprise through these numbers?
Aspiring entrepreneurs start their own business and do their best to triumph. Although they are successful in satisfying their customers, they are missing the essential part of having a business – analysing the numbers. Keep in mind customers are not the only ones who will make you stay in the industry. There are five essential numbers all entrepreneurs should monitor to determine if their business is a success or failure:
- 1. Profit
This is a crucial number of your business. Profit is how much your business earned for the last 12 months. This is to determine if your enterprise progressively goes up or down. Ensure you are earning enough to pay for your expenses and for the salary of your people.
- 2. Expenses
You are satisfied you have a lot of customers but it seems you are earning lesser and lesser every day. In Profit & Loss Statement, we have to consider if expenses are growing than the revenue. Sometimes, businessmen tend to spend too much money in getting customers they forgot to consider if they are really earning. Make sure there is always balance between expenses and revenue before you flush out all your savings.
- 3. Number of clients
Did you experience having your business goes way up high and then suddenly drop? This is possible as we concentrate too much on customers, we tend to overlook marketing our brand. Ensure to count the number of people you talked to regarding future projects. If it is a small number, then you have to do some marketing.
- 4. Profits every customer
If you are thinking the best clients are the people who pay the largest fees, then you are wrong. The best clients are the individuals who create the most profit. Ensure to determine how much profit you gain from each client. Gather the fees you collected from the customer or project, take away your expenses and you have your gross profit. Then, divide this profit by the hours you spent on the person or the project. This is now your hourly wage.
- 5. Accounts receivable
This number should be monitored often as this is the sum of unpaid invoices. It usually appears in Balance Sheet and must be organised well in order to pay the money you owe efficiently.
Take time to review and analyse the figures. In order to climb and stay on top, consider these numbers important for growth and development of your business.