Running a business keeps you busy. Between serving clients, managing expenses and handling everything else on your list, it’s easy to focus on the money coming in without really knowing what your numbers are telling you.
We see this often with the business owners we work with. Once their bookkeeping is organized and up to date, they have a much clearer picture of how their business is actually performing. Here are the numbers every business owner should know:
- Revenue is the total amount your business earns before expenses. Tracking it helps you see whether your sales are growing, declining or staying about the same.
- Profit is what you have left after paying your business expenses. For example, your business might bring in $20,000 this month, but if your expenses are $18,000, your profit is only $2,000.
- Expenses should be reviewed regularly so you know where your money is going. This can help you identify rising costs, unnecessary spending and opportunities to save.
- Cash flow is the money moving in and out of your business. Even a profitable business can run into cash flow problems if customers pay late or several large expenses are due at once.
- Money owed to you should be tracked by reviewing unpaid customer invoices and following up regularly, so you collect what you’ve earned and keep cash flowing.
- Money you owe should also be monitored. Knowing which bills and payments are coming up helps you plan ahead and avoid unexpected cash shortages.
- Profit margin shows how much of your revenue you actually keep as profit. Growing sales are great, but you also want your business to become more profitable.
- Taxes should be planned for throughout the year. Know roughly how much to set aside and work with your tax professional to stay ready for estimated payments and tax season.
Knowing these numbers and reviewing them regularly helps you make better decisions, plan ahead and understand how your business is really doing. Accurate, up-to-date bookkeeping makes that much easier.
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This article is general information, not tax or legal advice for your situation. Talk with us about your specific needs.