If math wasn’t your favorite subject in school, trust me: you are not alone. Often the creative types who are driven to be innovative, pave their own paths, and build their own businesses just aren’t engrossed in the numbers. They’d often rather be networking, selling, marketing—anything but number crunching. Can you relate?

Luckily, every entrepreneur doesn’t have to be a human calculator, but you do have to understand the basic business of numbers. And there is no better time than April, when we celebrate Financial Literacy Month, to review some of the key numbers you should always know about your business.

Why are these numbers important? Because they are key indicators that directly impact your bottom line. They’re the signs that keep us alert to whether we’re gaining momentum or chartering dangerous territory. Learn to understand the power of these numbers and you’ll add tremendous value to your business.

First, identify and track your key numbers consistently.

The first step in understanding the key financial indicators of your business is to determine exactly what those markers are. Identify three to five metrics that are critical to the success of your business; for example, you could look at sales, expenses, new leads, referrals, and complimentary sales calls.

After you determine your indicators, carefully track these numbers and regularly review them with an eye towards your goals. It is important to know if, for instance, the number of sales you’re closing each month leads to a consistent increase in sales and profits.

Next, know your cash flow. 

Cash flow is the amount of net cash generated by a business during a specific period. Because cash is the fuel that ignites a business, many consider cash flow to be a company’s most important financial indicator.

How do you track your cash flow? Monthly cash flow statements, whether generated by accounting software (i.e. Quickbooks) or by hand, can help provide a clear picture of inflow and outflow. This is hugely important information to consider when determining how to handle your expenses.

Your business may be profitable in the long run, but you may still run into periods when you do not have enough cash on hand to pay your bills if you are not monitoring cash flow closely. This is especially true for businesses that do a lot of invoicing, since customers may take weeks to remit payment.

Understand your P&L statements. 

The profit and loss statement is a simplified view of a company’s revenue and expenses for a specific accounting period (month, quarter, or year). It is important that business owners understand how to use their P&L statement to make adjustments to their business operations. I urge my clients to study their statements and draw out trends, inefficiencies, and areas for improvement.

It’s also fundamentally important to know the difference between the terms GROSS and NET. Many times, you’ll hear someone reference their income or profit, and the amounts sound almost too good to be true. Don’t be misled by folks bragging about their numbers. Ask to clarify whether the quantities are gross (profit before expenses have been subtracted) or net (profit with expenses subtracted). It’s equally important to understand what you’re grossing versus netting in your own business. Only then can you be sure that your business is in good health.

Build a team of trusted advisors.

As entrepreneurs, we must understand and apply basic business fundamentals on a consistent basis. But we don’t have to undertake this challenge alone!

Accountants, financial advisors, and business coaches can all provide invaluable support in helping you not only understand business fundamentals, but also harness them for your professional growth. If you already have a solid team in place, do not hesitate to use them! If you haven’t found advisors yet, start asking fellow entrepreneurs who they recommend. Don’t wait until a moment of panic to ask questions; preparation and knowledge are your friends when it comes to financial literacy.

At Celeste Giordano Coaching, I teach my clients how to identify the key indicators for their business and get them set for success. If you are ready to learn how your business’s numbers can allow you to “Double Plus” your income this year, all while creating a lifestyle that allows you to spend time doing the things you love with the people you love most, contact me today.

 

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Celeste Giordano’s mission is to help business owners develop the skills, knowledge and attitude necessary to “DoublePlus™” their income and become effective and inspirational leaders in their fields. Whether it’s taking your successful business to the next level or starting a new venture, she will teach you the exact skills and strategies you need to enroll more quality prospects, build a rock-solid team, and break through obstacles to achieve real profit and lasting success. Celeste is a professional business growth specialist, a master sales strategist, and dynamic speaker with more than 40 years experience in direct sales and managing high-performing teams.

To learn more about Celeste, click here.

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