Why You Should Know Your Numbers In Business

One of the biggest traps that small business’ face in managing their own finances is forgetting to budget for the GST. GST is not something that immediately comes to mind when clients are juggling their inventory costs, payroll obligations and supplier costs.

Real Case: Recently, we worked with a client who had accumulated a significant amount of GST debt because he was so caught up in the day-to-day operations, that by the time he was required to lodge his Business Activity Statement (BAS), he did not have the funds set aside, nor did he even know how much GST he had to pay.

Solution: We completed the clients outstanding BAS’s, negotiated with the Australian Taxation Office (ATO) for a payment plan and created a permanent process so the correct amount of GST was quarantined to a separate account each month.

Now when his quarterly BAS statements are due, the money is there and the stress of finding that extra money is gone.

Why You Need TO Know Your Numbers in Business

Not every small business owner has a background in financial management or accounting. Nor does the myriad of daily tasks that keep a business owner occupied leave much time for getting into the nitty- gritties of a business’s financial performance. However, it is absolutely imperative for every business owner to measure and understand some basic financial concepts that can predict how well a business is poised for success.

Knowing your numbers in business is vital for many reasons.

• Primarily, having a broad overview of your company’s financial position allows you to see whether you are on track towards meeting the goals that you have set for yourself.
• It is the objective of almost every business to turn a profit, and keeping a track of your financial performance means being able to estimate how far you are from reaching this goal.
• When you fall short of your goals, it is time to reconsider your strategy and optimize in order to continue growing.

What Can My Numbers Actually Tell Me About My Business Performance?

Understanding where the problems arise is key, and knowing your numbers can definitely help you quickly identify the root causes behind slow business performance. Tracking metrics on a broader scale, such as looking at your business’s overall income, can give you an overview of business performance, but having a grainier view of the numbers that contribute to this sum can help you further identify weak or underperforming areas, and come up with solutions to tackle them.

The numbers of your business tell its story. Keeping a track of them closely often helps identify small issues early on, before they have a huge impact on your business. In cases like this, spending a small amount of time understanding your business numbers can be a mitigating strategy, rather than trying to resolve issues in retrospect.

How Can I use My Numbers To Improve My Business’ Performance?

Your business numbers help identifying the way forward and coming up with a proven strategy, rather than trying to optimize your business approach based on assumptions. They reflect hard fact, and allow you to make solid decisions based on the actuals of your business performance. This is particularly important for small businesses with limited working capital that cannot afford to take too many risks in experimenting for success.

Understanding your business numbers is the key to understanding your business. By looking at your balance sheet, you can identify the primary sources of your business’ income, the biggest drain on your resources, and areas on which you need to focus and optimize. It is also important to know where your business stands in the larger scheme of things, by benchmarking its performance against the industry average, or your closest competitors.

For all these reasons, it may be a good idea to identify the four or five main figures that you should be tracking on a regular basis, and spending some time understanding them with the key decision makers in your business.

Taking Control Of Your Finances

AGI Bookkeeping are the experts when it comes to helping you understand your finances and managing your books. Working long hours and trying to manage all aspects of the business is something that all small business owners struggle to stay on top of. By utilising our knowledge and expertise, gained from over 16 years in the industry, we can help streamline your bookkeeping so you can focus on your growth.

We partner with human resources (HR) and industrial relations (IR) consultants to provide an all-in-one service, consisting of managing your Payroll, GST Payments and general day-to-day Cash Flow and profit and loss projections / budgets.

We pride ourselves on offering a professional, personalised service with offices Australia-wide.