What numbers do you need to track to manage your business effectively?
Depending on your goals, there are several ways to track your numbers, but the basics for all businesses are: turnover; cost of sales; operating expenses; taxes; and operating profit.
Turnover – Most managers monitor current month versus previous month in terms of income, but it’s important to keep track of this number over the longer term as well to spot trends and anomalies.
Cost of sales directly relates to being able to provide your service or product and can fluctuate wildly depending on supply chain issues or other procurement problems. Look around to see if alternatives are available, but the main thing is anticipation and budgeting. Plan ahead.
Operating Expenses – you need to spend money to earn money – include such costs as wages, equipment, memberships and licenses. This is generally the first place to look if you need to reduce outgoings. Track everything and reduce waste.
Tax – you will be expected to self-assess and pay your corporate taxes on any profits made in your business accurately and on time. Planning ahead is so important to keep on top of what will be due when you make your returns.
Operating profit – total income less operating expenses – this is the most important figure to assess the health of your business and you should have access to these numbers at the click of a button. This is the figure you want to see grow and providing you take care of all of the rest, you can monitor the health of your business right here.
It may seem daunting, having to stay on top of all these numbers, but it has to be done. If you need help in planning or just want someone else to do it for you, please give us a call.