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5 Numbers Needed to Run A Better Business

October 16, 2012

Spending 3 minutes a day looking at five numbers can provide needed controls, insights and overviews.  Every business is different but all have similar concerns – controlling cash, sales, payroll, purchases and understanding the break-even sales point.

 

Cash: There is no reason why an owner or manager can’t pull a report each morning that shows the total cash collections and disbursements for the previous day along with the cash balance and month-to-date totals.  Not being able to get this and the other four things would indicate serious problems with essential business controls.

 

Sales: The previous day and month-to-date sales.  Try also to get it by major product lines.  This is your business – know whether your billings and shipments are on target for the month.  If possible, review your order backlog and partial shipments and be able to understand increases and decreases.

 

Payroll: This is usually the largest or second largest expenditure for most businesses.  Look at it weekly by employee and understand what each person does.  Compare the current week with the previous week the year before.  Also review overtime pay, commissions and extras that might be paid for.

 

Purchases: If you deal with a product, get the daily and month-to-date shipments received.  Make sure you are receiving adequate supplies so you can ship timely.  Know whether inventory is increasing or decreasing and why.  Understand the shipping schedule and pattern of your suppliers.

 

Break-even: Have your accountant calculate it for you and target a daily and weekly sales amount.  You can almost instantly know if you made or lost money (and how much) by properly measuring your sales against the break-even amounts.

 

If you want additional information, email me at emendlowitz@withum.com and I’ll email you a handout expanding on these five critical areas.

2 Comments leave one →
  1. October 20, 2012 9:32 am

    Great points. In my world of small professional businesses the successful operators often think that they know these figures even without consciously taking the time to consider them. Yet problems occur when we lose focus for any reason. Recently I’ve found that cloud-based accounting aggregators like Balance Financial (introduced on my site at http://www.freedombenefits.co/Balance-financial-platform.html) can help a self-employed person get a better handle on this data than traditional accounting packages like QuickBooks. This is a great example of how improved technology can directly lead to better information, better management decisions and improved business results.

  2. October 22, 2012 9:11 pm

    Tony,
    Thanks for comment. Anything that works is worth looking into.

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