Do You Know Your Margins?

As a small business, it is important to constantly monitor your financial position in order to make sound business decisions. There are key indicators that you can use and steps you can take to get a clear picture of your financial health.

First, you need to track your revenue and expenses on a regular basis. This will give you a good idea of where your money is going and how much profit you are making. You can use software like QuickBooks or FreshBooks to easily track your finances. The key is to be diligent. A good bookkeeper is a must for a small business. As an owner/CEO, you must review at the bare minimum once a week to keep on top of the finances, even if it’s only for ½ hour a week.

Second, you need to create a budget and stick to it as closely as possible. This will help you control your spending and ensure that you are not overspending in any one area. The budget is possibly the most overlooked aspect of a small business. It sets a marker or a guide that allows you to measure your performance against it, to give you an indication of how you are performing against expectations.

Third, you need to keep an eye on your receivables and payables. This will help you stay on top of your cash flow and make sure that you are not falling behind on payments. In a perfect world, you will have a balanced amount between the two.

Fourth, you need to monitor your inventory levels and costs. This will help you avoid stockouts and keep your costs under control.

Fifth, you need to track your metrics and KPIs on a regular basis. This will help you identify areas of improvement and ensure that you meet your goals.

By tracking these key indicators, you will be able to get a clear picture of your financial health and make sound business decisions. The easiest way to do this is to create a solid process for your data and finances, just like you would for operations. A sound foundation and process allow for better transparency, easier scalability, and better decision quicker.

Let us help you get a clear picture of the health of your business and discover if your margins are truly what you believe them to be. Learn more about our 12-Month Cash Flow Forecast.

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