A very important lesson was learnt on Sunday night’s episode of Shark Tank by a founder of Melbourne based startup WeTeachMe and that is, Know Your Numbers!
It is essential to track your numbers and know how your business is going, it is the best thing you can do for you business.
Why should I track my numbers?
- Do you want to be able to raise funds for your business? If so, you need to know what your revenue is and how much is coming in and out of the business.
- How can you keep yourself accountable if you aren’t actively measuring your performance? and further how can you be accountable to others (business partners)?
- How are you able to grow your business and make investments if you don’t even know whether you have any money available?
If you want to be a successful startup then these are the sorts of questions you should be able to answer straight away.
So What Can I Use To Help Me Track My Numbers?
Even if you have only just started out and don’t have any sales, it is important to track your business performance and expenses early on. A tool that can be used is Wave. It is a cloud tool to assist small businesses in tracking their numbers and are a great way to start getting on top of things. If you’re already making sales, then you may want to consider using a cloud based Australian software such as Xero or MYOB Essentials. They offer most things that a startup or small business will need – these are paid services but are definitely worth the investment!
How Your Numbers Look
If you are using the above tools to track your numbers, there are a variety of different reports available. It is imperative that you understand what these reports mean as a clear understanding will help you to make decisions that will help grow your business. Some of the key reports are:
- A Profit and Loss – This report tells you how your business is performing, it shows you the sales you have made, the expenses you have paid and overall how well your business is doing.
- A Cash Flow Summary – This report details the cash you have received and the cash you have spent. The difference between a cash flow and profit and loss is that often you will record a sale when you send the invoice to the customer, not when you are actually receiving the money.
- A Balance Sheet – This report demonstrates the businesses health, that is after taking the assets of the business and subtracting any liabilities.
So what are the three things you should really be focusing on with your numbers?
- Understand where your sales are coming from and how your expenses are helping you to generate more sales
- What is the best way to receive payments from your customers without spending valuable time chasing them up? This is important because without cash, your business will not grow.
- What are your numbers actually saying about your business? If your numbers aren’t looking too healthy, you should change quickly to avoid slowly failing.
By following these finance essentials you can see your business well on the path to success and hopefully you won’t find yourself not knowing your numbers in front of the sharks!