It is important as a small business owner to stay focused on the basics of business success; one of the most fundamental components of achieving business success is keeping good financial records. The importance of keeping good financial records cannot be overstated. It is important at tax time, it is important if you need to get a loan, it is important if you want to adequately monitor your business performance, it is important if you ever want to sell your business, and it is important just to know where you money is going, when, and how. You must develop good record keeping habits from the inception of your business. If you start off with bad habits it is much more difficult to clean up after yourself at a later date than it is to start with a system in place that can help you quickly and easily keep track of your business finances.
The reports that you create and review allow you to maintain control over very important aspects of your business. How can you as an entrepreneur establish timely, relevant financial controls for a rapidly growing small business? Analyzing financial data can be intimidating to some business owners, but it is an integral part of business success. If the owner doesn’t understand the numbers, or doesn’t have the time to analyze the figures, then the business owner should hire an accountant. Eventually, though, the business owner should learn how to read their financial statements because the ultimate responsibility of protecting a business lies with the owner.
Generate your numbers in a timely fashion, as accurately as possible. Financial statements should be generated no more than ten days after the end of each month.
Establish priorities concerning with numbers to monitor, and when to monitor them. A good guideline is weekly versus monthly because daily information can lead to overload.
Get month updates on inventory accounts receivable, and accounts payable. With accounts receivable and payable, know the age of each account and the average collection period.
Get weekly updates on current cash position, cash disbursements by major category, cash receipts, new sales, order backlogs, and number of employees. With employees, know productivity ratios, such as sales-per-employee.
Compare the real figures with projected figures. Expectations should be tempered by real-life figures, and you should always know how your expectations align with actual results to see how realistic your expectations were.
Once you know exactly which numbers are specifically important to your company’s success, prioritize. Develop a weekly condition report to summarize key figures. This report should show recent projections as well as real results.
Make sure that everyone who needs to know does know. Circulate financial reports to the responsible managers and key employees. It is important for these workers to have access to this information for their day-to-day decision making.
Analyzing numbers and financial data over time and comparing them to industry standards is one of the best and most practical ways to make a business better. Every industry has benchmarks. Know what those benchmarks are, and use ratio analysis to measure your company’s performance. It’s always important to realize that your performance does not occur in an isolated system, and customers are always comparing you to your competitors.
Posted in 
Tags: 