How to Find and Track Critical Numbers in your Business

How to Find and Track Critical Numbers in your Business

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Do you know the critical numbers for your business?

Your critical numbers are the ones that tell you whether your business is on track (or not).

If you know your critical numbers, you can have real peace of mind that all is well, and an effective alert system when potentially all is not well and action is needed.

So why do successful businesses pay so much attention to these critical numbers?

  • Knowing your critical business numbers will keep you from risking hefty fines or other more expensive action from not complying with IRD and other government agencies.
  • Knowing your critical business numbers tells you if your business is making money or not. Sounds obvious but many businesses don’t know this. If you do know which parts of your business make more money, and which parts you are doing “for love”, you can make better decisions.

What are the numbers?

Here’s a list that you are likely to recognise, but much less likely to have acted on.

  • Cash flow forecast
  • Profit and Loss Statement
  • Balance Sheet
  • Gross Margin
  • Price Points
  • Total Inventory

A lot of businesses we work with are just overwhelmed and unable to take any action on any of these financials because it’s not relatable – too much jargon and looking at rows of figures that don’t mean much. The reality is that it can take a lot of time and effort to learn to understand how to read the numbers for your business as well as your accountant. But the good news is, there are ways to translate these figures into something that makes sense to you.

How to get the numbers?

Be clear about who in your business is the right person to be working in this area. If it’s not your strength, find someone in the business who loves it and will excel, or engage with a professional who can tailor their service to just what you need. In this age of Cloud Software such as Xero, support can usually be provided remotely without any interference to your business or needing to provide space or computers.

Consider engaging an advisor who can really understand your software and systems and extract the information you want. For example:

  • Setting up Xero so that you can easily see and compare how different parts of your business are doing.
  • Making up a custom report that shows your gross profit percentages at a glance, to compare month by month
  • Using an app to turn some of your critical numbers into graphs for easier interpretation.
  • Sorting out a Xero dashboard with some key metrics and accounts you would like to keep an eye on.

This way, rather than looking a whole lot of numbers that don’t really mean much to you, you can look at a few key numbers and compare them over time.

Are the critical numbers real?

Its is critical that the financials for your business are made up from complete and accurate data. But can you trust that the data is right? We see a lot of businesses where the owner has their own separate spreadsheets and manual systems to keep data they feel they can trust. It takes a lot of time, and usually is duplicating what is already in the accounting system.

Here are a couple of things you can do to ensure your critical numbers are real:

  • Have a specialist bookkeeper have a close look into your accounting system to give you confidence that the figures are saying what you think they are saying. We often come across situations where mis-codings or incorrect practices have resulting in big errors in how much profit it looks like the business is making. This can lead to incorrect tax payments and sometimes nasty surprises later on.
  • Sometimes the systems being used to record the information for your business are just not up to scratch – get advice on what systems are out there that could give you better information for your business. It could be timesheet recording, job management, inventory, point of sale, customer relationship management, the list goes on. There are over 500 apps available for Xero alone!

Are you ready to sort out your critical numbers?

We work with businesses to work out what the critical numbers are, ensure they are being recorded accurately, and are reported in a way that is clear and easy to understand.

Want to find and track your critical numbers? Book a free one-hour discovery session with us and we’ll help you get started.  Call me Helen on 0276005794 or email me on helen@livingbusiness.co.nz to get started.

We work with businesses to work out what the critical numbers are, ensure they are being recorded accurately, and are reported in a way that is clear and easy to understand.