The Numbers Every Successful Business Owner Should Know

Running a business means wearing approximately 47 different hats. 😅

You’re serving clients, sending invoices, answering emails, managing expenses, keeping up with your actual work… and somewhere in there, you’re also supposed to know what your business is doing financially.

It’s easy to look at your bank balance and think, “Okay, we have money!” But your bank balance only tells you what’s in your account today. It doesn’t necessarily tell you whether your business is profitable, where your money is going, or whether you’re actually on track to reach your goals.

This is something we see often with business owners. Once the books are cleaned up and up-to-date, the numbers start to tell a much clearer story.

Here are a few numbers we think every business owner should know:

• Revenue is the total amount your business earns before expenses. Tracking it helps you see whether your sales are growing, declining, or staying about the same.
• Profit is what you have left after paying your business expenses. For example, your business might bring in $20,000 this month, but if your expenses are $18,000, your profit is only $2,000.
• Expenses should be reviewed regularly so you know where your money is going. This can help you identify rising costs, unnecessary spending, and opportunities to save.
• Cash flow is the money moving in and out of your business. Even a profitable business can run into cash flow problems if customers are paying late or several large expenses are due at once.
• Money owed to you should be tracked by reviewing unpaid customer invoices and following up regularly so you can collect the money you’ve earned and keep cash flowing into your business.
• Money you owe should also be monitored. Knowing which bills and payments are coming up helps you plan ahead and avoid unexpected cash shortages.
• Profit margin shows how much of your revenue you are actually keeping as profit. Growing sales are great, but you also want to make sure your business is becoming more profitable.
• Taxes should be planned for throughout the year. Know approximately how much you should be setting aside for taxes and work with your tax professional to stay prepared for estimated tax payments and tax season.

Your numbers tell a story. You don't need to become an accountant to understand your business finances, but you do need to know enough about your numbers to make informed decisions.

When your books are accurate and up to date, you can move beyond simply asking, “How much money is in my bank account?”

You can start asking better questions:

Is my business profitable? Where is my money going? Am I growing? Can I afford to make this investment? Do I need to adjust my spending?

That’s where good bookkeeping really starts to make a difference.

If your books are behind, confusing, or making you want to avoid looking at your numbers altogether, that’s where we can help.