Do you know your numbers? They are crucial to a company’s success – but a staggering number of UK business leaders don’t know what they are!
A survey last year by Xero discovered that 35% of UK business owners didn’t know if their business was profitable. And more than half didn’t know about cash flow management.
The same number told another survey that they made decisions based on incomplete data every month!
There are a lot of reasons why business owners struggle with their numbers. Research by Oracle revealed that people in business are not only busy with dealing with business issues, they’re also bombarded with information. A total of 70% said they’d given up on decision making because they were overwhelmed.
Knowing your numbers is important. It can help you make informed decisions and can make the difference between your business succeeding and struggling.
Getting an experienced accountant on board who can decipher the most up to date figures is advisable. But why are those numbers so important?
Why you need to know your numbers?
No matter what sector you’re in, you will reach a dilemma at some point. You might be used to just looking at your company’s bank balance when you need to make a purchase or plan to invest. But your bank balance doesn’t give you the full picture. Understanding your numbers is crucial and can make a difference between success and failure. Here’s why you need to know your numbers…
It helps you make decisions
How healthy is your business? Not in what you think, but how healthy is it in reality? You could assume it’s fine but unless you have a clear understanding of your business’s financial health you can’t make informed decisions. You won’t know if replacing equipment or expanding your production line will end up crippling your company! The only way to avoid that is to know the financial health of the business. That’s why you need to know your numbers.
You can identify trends
By analysing your business numbers you will be able to spot trends or patterns! They will show you what products and services are doing well, what the most profitable times of the year are and what marketing strategies are working. That means you can capitalise on what works. If something isn’t working, you can also decide whether to change track or abandon any plans.
It helps your goal setting
Goal setting is good for business. But not everyone bothers to set goals. You should. But there’s no point if your data is outdated or just wrong because it’s based on assumptions rather than facts. Understanding your financial information means your goals are based on fact. It helps you know whether your plan to hit a specific turnover or profit target is real. There’s no point saying you want to grow your profit margin by 25% if the past few years have shown 10% is more realistic. Not hitting goals can be demoralising, so goals must be achievable!
Your cash flow management improves
At Concept Accountancy, we love to analyse a company through cash flow forecasting. It tells us so much about a business. Cash flow is the lifeblood of any business. If you don’t have enough flowing in, then what is going wrong? If you know your numbers, you can predict future cash flow needs and you can plan for any seasonal dips and troughs. It means you won’t simply run out of cash when you need it most. Not being aware of possible cash flow problems can impact the growth of your business.
It boosts profitability
Knowing your numbers helps you know where to cut any costs that aren’t adding anything to your business. It helps you identify waste and reduce any expenses. For example, are there subscriptions you really don’t need but you’ve overlooked? The more profitable your business, the more likely it is to be a long-term success.
You can cope with economic changes
The past couple of years has shown that the economy is never a straight line. Unexpected events can create a dip and political policies can increase costs. Knowing your numbers can help you make adjustments to the business landscape. Not knowing them means you will not be prepared and that can lead to disaster.
What should I do?
Knowing your business numbers isn’t just about balancing your books. That’s important, of course, but to make your business more profitable and fit for any challenge you need to have the inside track on your numbers.
If you want to know about numbers, then we can help. Speak to our team today about how we can help you know your numbers.
