No matter the type of business you’re running, monitoring key indicators is important to keep it growing and prosperous. Neglecting them can lead to corrective actions that might be too little, too late. Here are some numbers to keep an eye on:
Are you selling more units over time? To find out, look at your sales figures by units. Tracking revenue alone may present a false picture. After all, revenue may be growing because you are raising prices. If unit sales are declining, you might be losing market share.
You need to know if you’re selling enough products or providing enough services to cover your other expenses. If you’re dipping into reserves to cover revenue shortfalls, adjustments may be required.
Every month your accountant or bookkeeper should ensure your general ledger agrees with the bank’s records of deposits and withdrawals. If a company is losing cash the bank statements should tell the story.
Controlling the product on your retail shelves and accumulating in your warehouse is often a key to profitability. Buying too many items may lead to excessive storage costs and high waste. Remember, every dollar in inventory is a dollar you don’t have available as cash.
Staff size should be commensurate with revenues. Medium-sized businesses especially can find that labor expenses grow too rapidly. A decline in orders may signal a need to reduce payroll costs. Divide your sales by the number of equivalent full-time employees. Then compare this figure over time. Revenue per employee should be growing!
A business key performance indicator (KPI) dashboard can help you compare your business’s vital numbers over time, identify changing conditions and adapt. If you would like to discuss a dashboard for your business, speak to an Alloy Silverstein CPA and Advisor.
Director of Small Business Services
Janine works one-on-one with small businesses who outsource their bookkeeping and business financial reporting to a knowledgeable, efficient, and trustworthy advisor.
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