I recently had a new client burst into tears when I asked her to identify her most profitable service. Little did I know even the suggestion of a financial question would trigger such an emotional response. The fact was this client (as well as many of my new clients) steadfastly avoided looking at the financial aspects of her business because her lack of understanding of the reports and statements frightened her terribly. The only number she looked at was the balance in her business checking account when it came to bill paying time. 

Whether it’s fear or a host of other reasons, as small business owners, it’s easy to get caught up in the operations of the business and lose sight of the numbers behind it. Yet, it’s crucial to keep a close watch on the financial figures.

Ask yourself: How diligent are you when it comes to tracking and reviewing your financial metrics?

Let’s break down some of the most important ones. 

Your Compass: P&L

First up, we’ve got the Profit and Loss Statement – the P&L. This report gives you the lowdown on your gross income, expenses, and net income. It’s like your business’s financial report card, revealing everything from your top-selling products and services to your most lucrative clients to no-longer-needed-but-still-paying-for expenses. Reviewing this on a monthly basis uncovers valuable insights and helps you steer your business in the right direction. When you look at the bigger picture, quarter over quarter, you’ll gain even more insight into seasonal and other patterns. 

The Unsung Hero: Cash Flow

Next on the list is Cash Flow – the unsung hero of financial metrics. This report tracks the actual cash coming in and going out of your business, ensuring you’ve got enough of a base to sustain your operations, at the very least. 

Take it from my HVAC client who learned the hard way. Looking at his P&L alone, you’d see a flourishing enterprise. Cash flow issues arose, however, when acquiring new equipment and vehicles needed for expansion. These challenges stemmed from delayed payments from several commercial clients on outstanding invoices. To mitigate these issues and ensure sustainable growth, I helped this client strengthen payment policies and follow-up processes to maintain a healthy cash flow. 

Lesson learned? A profitable business on paper matters little if you’re struggling to pay the bills.

The Irritant: AR

And let’s not forget about what’s often a business owner’s biggest source of frustration – Accounts Receivable. Got clients who are dragging their feet on paying? You’re not alone. Some of my clients were hesitant to follow up on outstanding invoices because they didn’t want to offend their clients. They forgot that a gentle nudge can work wonders. One of my clients recovered $25,000!! in one month after we crafted a simple professional reminder notice to his past due accounts.

I understand – numbers can be intimidating. But mastering these financial metrics isn’t just about crunching numbers – it’s about gaining confidence in your financial acumen and fueling your business growth.

If you’re feeling a bit lost around your finances, don’t get stuck in overwhelm! Let’s chat and simplify things. Your business’s bottom line will thank you! Schedule your Complimentary Discovery Call today!

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