Businesses that increase their profits year on year survive. Whilst success is made up of a number of different factors, a key part of it involves knowing your numbers inside out! Those that know the figures related to their business have a greater understanding of their financial situation and are therefore able to make better decisions for their company. In this article we will explain how you can increase your profits and gain more control over your business by knowing your numbers inside out.
Knowing your business numbers inside out can help you to gain control over your operations. It can also help your business generate higher profit margins, as you will have a better understanding of the cost of your business processes.
Tips on knowing your numbers
First of all you need to have a good idea of the money that is coming into your business (via sales) and the money that is going out (costs). Knowing this information will help you to balance the two, ensuring that your sales are covering your costs and making a profit on top.
You also need to have an understanding of the number of average sales you are making a week. Knowing this information will enable you to make sales forecasts. Businesses that have good knowledge of their customer base are able to make more accurate sales predictions. In order to do this you will need to gather information such as the number of leads you have, the number of those leads that are converted into sales and the average amount customers spend per transaction.
One of the most important numbers you need to know is your profit margin. This is the amount of money from every sale that is purely profit. It is shown as a percentage and is an indicator of your effectiveness at managing your business and its resources. Every action you make will have an impact on your profit margin. It will either increase your profit margin, if you are making savings on your resources or decrease your profit margin if something like the cost of manufacturing has increased.
Knowing your numbers will help you to make more profit, as you will be in a position where you can constantly tweak and control your overheads and costs.
It is an excellent idea to set up an accounting system to track your numbers. You should be looking at your numbers at least once a week. If managing your finances is too time consuming or complicated, you could always outsource it to a professional accountant.
Many new business owners make the mistake of ignoring their finances when they first set up. Rather than getting yourself into a messy financial situation, simply outsource the work to an accountant!
The benefits of accountancy services
Not a numbers person? Don’t panic! You can’t be good at everything after all. Simply outsource your accountancy work to us and we will provide you with all the information you need to know about your numbers. We will get your finances in order, helping you to identify the most profitable parts of your business and any areas where you are making losses. By seeing this information in a clear and concise format, you will be able to evaluate your business’s financial situation and make important decisions for the future.
Conclusion
It does not matter whether you have just set up your business or have been in business for years, you should be running profit and loss, budgets and forecasts on a weekly basis. Keeping on top of your numbers will help to keep your business in good shape and allow you to get a better sleep at night!
Image credits: reynermedia & Dave Dugdale