Good financial management is essential to allow business owners to make proper decisions through the year as business conditions change. Periodic quarterly or annual reviews are not adequate.
Performance should be reviewed monthly against goals established for the year.
Key indicators to review include:
1. Revenue Growth:
are sales increasing year over year and meeting targets?
2. Profitability:
is the business making adequate profit compared to goals. Are profit margins improving?
3. Liquidity:
are short term obligations covered? What cash and easily converted assets are available for current operations?
4. Cash Flow:
are you generating sufficient cash to operate? Is bank financing required to help fund growth?
Sometimes businesses can measure their performance against competition within the industry. That may help highlight areas where improvement may be needed.
It is important to not only make money in a business but it should be professional is its management approach and managing financials is an important step to achieving both goals.
These were just a few considerations. Please let me hear your thoughts.
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