How do you measure your Financial success?
How do you measure the success of your company? Many small-business owners rely on two traditional financial reports: the balance sheet the income statement. The first tells you what your business owns and owes at a particular point in time, and the second tells you what profit you’ve made over a period of time.
Although both are important here are a few other controls to monitor the health of your business:
• Cash Flow. Are you generating sufficient cash to operate? Is bank financing required to help fund growth? Ever wonder at the end of the year where all the money went? This will provide the important tracking.
• Accounts receivable Collections: Cash flow is dependent on timely collection of receivables. As receivables grow cash flow is stretched thinner. Slow collections can affect liquidity and your ability to cover short term obligations.
• Average sales per customer. As overall sales grow it is important to maintain growth with existing customers. This is often easier than finding new business and a measure of your success in gaining repeat business.
• Margin. Don’t become too focussed on net revenue and become content if this increases yearly. It is important that revenues don’t cost more to generate each year. Operational efficiencies are important to monitor continuously.
Sometimes businesses can measure their performance against competition within the industry. That may help highlight areas where improvement may be needed.
These were just a few considerations. Please let me hear your thoughts.
Gerry@polarisgroupmc.com
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