If you talk to many professionals you will hear that one of the most important things in business management is to know how to take care of present finances. If you do know at least business finance basics you are going to make proper informed decisions that are based on reality and not assumptions. Most of the businesses are now trying to generate more sales as this would bring in a better result but in many cases the big problem is that current finances are not properly managed.
Companies are required by law to employ an accountant. However, according to Frisch Financial Group, business owners just get the spreadsheets from the accountant and do not even analyze the figures that are presented. That is because interpreting data is not something that is understood. When you look at the last 5 year worth of spreadsheets you will figure out that there are some trends that appear. They are going to help you so much in increasing your overall profit on the long run.
As a simple example, do you know the annual turnover of the company? Do you know the per employee annual turnover or the stuck turnover? These are all measurements that are really important. You do not need to put in a lot of effort to answer such questions and the answers are normally going to highlight various opportunities you are missing out on.
Focusing On Profit
The focus of the business owner has to be put on profit. Remember that according to statistics around 80% of the profit for most companies comes from around 20% of the customers. When you know who those 20% are, you can better service them so you stabilize the company for the long run. It is easy to figure out what customers take up too much of your time and how to better balance working operations with the purpose of increasing sales and profit in the future.
Look At Cash Flow
Most startups fail because of improper cash flow. This basically means the owners do not know how much cash is available. Even if it seems that the company has all the funds needed, they may be stuck in assets or in bills that are not yet paid. You want to be sure that you maintain a truly healthy cash flow for the business at all times. If you do not do this, you will have problems with suppliers and eventually you will not be able to properly service those high paying customers.
Having Vague Understanding Of Finances
It is very important that finances are not abstract and vague for you as a business owner. You have to look at every single document the accountant offers and you have to analyze all that happens in the company with the goal of increasing profits and minimizing costs. However, you have to be sure that you never sacrifice quality or you would end up with huge problems. Quality is the reason why your business grows or not.