So you want to build a stronger business. It’s one of the goals that everyone in your workplace should strive for, but to do so you need to know the nuts and bolts of the bigger financial picture.
The day-to-day business choices can have a huge impact on your future. By understanding your business’ financial health, you’ll avoid nasty surprises further down the road.
It can be an overwhelming task, but by breaking things down into manageable steps you’ll get a better idea of how your business is performing.
Bartercard has compiled the Seven Habits of Highly Effective Small Business Owners – a handy guide that provides the insight you need to tackle every aspect of business ownership.
Two of those habits include mastering the basics, and keeping an eye on the cash going in and out.
It might seem obvious that you need to pay rent to your landlord, pay your employees, and collect customer payments for your products and services, but you need a better understanding of your financial position.
If you’re reaching revenue target, what about net income? How much revenue is overhead? Is the percentage of your gross profit up-to-par with industry averages?
In addition, what metrics are really important for your unique needs? If you ask the right questions and focus on the right things, there’s a smaller chance that you’ll hit trouble down the line or that your operating expenses are unusually high this month.
Your product might be fantastic but if you’re not selling enough, you’ll find it difficult to cover monthly obligations.
According to Bartercard, it’s not only the big financial numbers like revenue that paint a picture of your business’s overall health – the daily expenses also count.
“Without enough income to cover what's due, you won't last long, and paying cash now when you'll need liquid assets later can be the nail in your coffin.”
So if you know what money is coming in, what’s on hand, and what’s going out, these can make daily operations easier.
You can review existing obligations and look at what you need to cover them, how much cash is available, and if there’s anywhere you can cut costs
With guidance and know-how, you can whip your business into shape and keep it going indefinitely.