THE NUMBERS MADE EASY

Nick Roberts

The only numbers many business owners see are the year-end financials and few, unfortunately, understand them. If you want to be successful in your business it's vital to both understand and focus on the numbers:

• Work out your margins on every product and service in your business and across divisions, branches, salespersons, projects, customer segments, or suppliers. This information is critical to profitability since it enables you to eliminate or improve poor performers and can now be extracted automatically from cheap accounting software.
• Prepare a cashflow forecast for the year ahead and a monthly cashflow statement so you know exactly what working capital you will need and where your cash is going.
• Know your costs. Reduce these where possible, prepare a simple budget, and import this into your accounting software. Any costs over budget will need attention.
• Learn to understand your financials. Get your accountant to explain them to you and make them the first step in the financial management of your business, not the last.
• Produce a concise monthly management report. Get yourself into the routine of analysing your figures every month by sitting down with your accountant. The report should include monthly P & L's, cash flow, aged debtors and creditors plus other key factors such as prospect conversion rates, labour productivity rate or your average $ sale.

If you want earn more but work less you will be well on the way if you can get to grips with your numbers.

If you have any tax or business queries of any kind telephone 0800 ASK NICK, e-mail nick@abac.co.nz or use "Contact Us" on www.abac.co.nz. The information in this article is of a general nature and should not be relied upon as a substitute for specific advice.