Manage your Business by the Numbers to Accelerate Growth
By: Corporate Training Options, Australia
Manage your Business by the Numbers and you’ll know how your Business is Performing
In this article you’re going to learn a little about how to Manage Your Business by the Numbers.
The fact is, it’s essential for business owners and managers to understand their business financial statements.
If you only look at your business financials at the end of each month, or at the end of each quarter when your BAS is due, then you are missing out on huge opportunities in your business. Why? Because your financial reports tell the story of how your business is performing, and show you ways to make improvements, and increase profits.
To learn more about the Managing by the Numbers Finance Training course available from CTO, click here.
How is your business performing?
I know many business owners who have started out and are going great guns, but are not tracking their performance.
Let me tell you, if you don’t know the basics; for instance, what your Breakeven Point is; you should.
If you don’t understand the numbers in your Profit and Loss or Cash Flow reports; you should.
If your Balance Sheet makes no sense, then you need to learn how to read it.
Why?
A Cautionary Tale
Let me tell you a story about a consultant who was working in our business. Each week when he came into the office, the first thing he did was review the Profit and Loss Report, the Cash Flow Analysis and the Balance Sheet. After that, our business meeting could begin, and he could offer logical business growth advice based on facts, because we all knew the business numbers!
One day, he told me how he had been to see a new client, who had not reviewed their Balance Sheet Report for more than six months. The business owner had simply been relying on the company accountant to pay all outstanding bills, and to advise him of their ongoing profitability, and their expected future costs.
The first thing our consultant noticed when he reviewed the Balance Sheet was that the company had outstanding GST liabilities. Upon further inspection, he realized that no GST payments had been made for over six months. The company owed the ATO over $120,000!
That was a huge shock to the business owner. He then had to scramble to make a payment arrangement with the ATO to pay off the outstanding debt, while also dealing with current and ongoing GST liabilities, while keeping the business afloat. This business owner did not know his business numbers!
The Horror Stories
Then there are the horror stories you read in the news, about company accountants and bookkeepers who have embezzled from the organisations they worked for, without the owners ever missing the funds.
Now if the business owners and financial managers had been keeping an eye on their financial reports, and if they had understood their business numbers, they may have picked up earlier that something was amiss.
The only one of these stories that ever had a positive ending was when it was discovered that the bookkeeper had been taking the company funds, and investing in real estate. By the time she was discovered, she had purchased more than 21 houses (we are talking about a big company here, with millions in cash flow each quarter). The upside was, the company was able to sell the properties at a profit, as the Australian housing market had been gaining strength for some years.
However, most of these stories end very badly, and often, embezzlement can send a company bankrupt.
Why you should Learn how to Manage by the Numbers
So, learning how to manage your business by the numbers, can offer you huge advantages. Once you know how to read and understand your financial reports, you can:
- Learn how to find the Right Numbers
- Review your Financial Statements
- Make more Money
- Identify Costs and Their Behaviours
- Control Costs
- Learn your Breakeven Point
- Understand Influences on Pricing
- Make the Numbers Work for You
What is a Breakeven Point?
By the way, if you don’t know what a Breakeven Point is, here’s a really simple overview. A Breakeven Point is the point at which your sales exactly cover your expenses. It’s arrived at by an analysis which allows you to know precisely when your business will begin to cover all expenses and start generating a profit. Now that is a really BIG date on your business calendar.
Imagine the day you reach that magic number, and you know that from here on in, as sales increase, you’ll finally be making a profit. Whether this happens on day 60 or day 600 from when the business was started, it’s a great day in any organisation.
Why is a Knowing your Breakeven Point important?
So why is this simple number so important? Well, imagine the information you’ll have at your fingertips when you complete your Breakeven Analysis, and what you can do with it.
You can start to better manage your fixed costs, like rent and insurance, and reduce them if you have to. If you’re not making money yet, why not move to slightly cheaper premises for a while, or even work from home.
You can also work on your variable costs. Things like marketing, labour, commissions, credit card fees, even freight costs if you ship stock. Examining each area of your variable costs allows you to reduce these costs where possible, which immediately increases your chances of hitting breakeven sooner.
Lastly, you can look at pricing. If your products or services are selling well, you may consider raising your prices. This can instantly lead to increased profits, and tip you over the edge of your Breakeven Point. From here on in, it’s smooth sailing all the way.
What about your Cash Flow Report?
Cash flow is vitally important to your business. Even if you are very profitable, you can still go out of business if you run out of cash. Your Cash Flow statement tells you what revenue is coming in, and what it will be spent on. Even if profits are high, you may not be able to pay the wages next week, if your cash flow is low. Everything you do in business uses up cash, including buying equipment, adding inventory, marketing for new customers, and paying wages. Understanding your cash flow can help you focus on ensuring you always have enough.
The reality is …
Having a solid understanding of how your businesses finances work is vital for any business owner or manager wanting to boost their metrics, reduce costs, and accelerate their business growth.
The trouble is, many business owners and managers feel that these essential financial metrics are the Company Accountant’s responsibility.
Consider this for a moment
What if you and your managers start to be proactive, so you can identify, learn and apply various accounting strategies and essentials in your organisation. These strategies relate to financial data such as:
- Learning about operating leverage and its impact on profitability
- Understanding key financial terminology
- Gaining an understanding of how various business transactions are reflected in your financial statements
- Demonstrating awareness of relevant taxes (including goods and services tax)
- And being able to explore the different types of costs and their effect on your profitability
Whether you’re a business owner, a professional looking to become self-employed or a manager wanting to better understand your company’s operations strategy, understanding how you can manage your business by the numbers will equip you with the fundamental knowledge you need, to understand and grow your business.
In Summary
Understanding how to manage your business by the Numbers is essential.
Imagine being able to review your financial statements accurately and confidently. Your business, operations and profits can accelerate fast, and your costs can be reduced!
If you think you need an accounting background to learn these skills, you don’t. The fact is anyone can learn and apply these essential business financial skills.
Additionally, they are crucial if you are to thrive and accelerate your business growth in today’s competitive marketplaces.
Learn more about the course
If you want your organisation to thrive, getting the right training is fundamental.
Corporate Training Options has a wealth of knowledge that we’ve shared over the years when training business owners, managers and company teams with great success. We’ll help you to understand your business numbers, to reduce costs & accelerate your business growth, with skills that are easily learned and quickly adopted.
The Benefits and Learning Outcomes you will achieve from our course – Accounting Essentials: Managing by the Numbers include you being able to:
- Learn how various business transactions are reflected in the financial statements
- Identify the five cost categories and their components
- Explore the types of costs and their effect on profitability
- Understand the concept and calculation of break-even analysis
- Learn about operating leverage and its impact on profitability
- Discover the various influences on determining the appropriate price for a product or service
- Understand the problem-solving process of identifying costs relevant to decision-making
For more information or to book your training, view the details of the course here.
About Corporate Training Options
Corporate Training Options (CTO) is a Business Training Company, which provides you with training in essential business skills, via onsite and online professional development courses.
The courses provide a cost-effective way of ensuring you and your team are presenting your best image to the world.
CTO onsite courses are customised to meet your requirements and will assist you to develop strong skills in:
- Customer Service
- Leadership & Management
- Strategic Business Planning
- Project Management
- Marketing & Sales
- Business Administration
- Finance & Accounting
- People & Culture
- Computer Software Training
- Personal Development
For more information on the range of Business Training Courses available, please visit the CTO website – cto.com.au
We look forward to working with you, to build your confidence, improve your efficiency and maximise your potential.
Rosy King
Corporate Training Options
Professional Training – Exceptional Results
