You already know that the numbers matter. They give you the opportunity to accurately see how well your business is doing or whether some changes need to be made to help things along. Instead of relying on a gut feeling, they provide concrete, clear indications of how things are going.
However, many small business owners tend to focus only on the main numbers: income and expenses. They let their accountant (if they’re working with an accountant) take care of the more complex, detailed numbers.
Yet when running a business, better knowledge of just what those numbers mean can help you understand the financial health of your business, what the road ahead looks like, how you compare to competitors, and more.
Your numbers and potential investors
If you’re just getting started with your business, chances are you’ve looked into getting financial backing. Whereas this kind of investment comes primarily from a solid business plan and indication that you are putting up a fair amount of your own finances (as well as selling yourself as a brand), future potential investors will look more closely at your business performance. Yes, the numbers.
For small businesses, the numbers likely change more often than with that of a larger company. Because of this fluctuation, it’s important to stay on top of finances month-to-month, as it’s more than likely that this will be the type of time-range that potential investors will consider - it’s not uncommon that they request monthly reports.
This is when having a good grasp on your cash flow can make a big difference. When you can easily provide a monthly overview to potential investors, it not only allows you to present your business, it also speaks to your professionalism.
Your business numbers and decision-making
Whether you want to secure funds from an investor or bootstrap and do things yourself, the numbers matter. If you choose bootstrapping, it can be tempting to put aside the numbers to deal with at a later time. While it used to be tedious, it’s now possible with software like Debitoor to record your income and expenses from anywhere.
This kind of information can be a key difference in major decision-making as far as steering and development. Understanding where the majority of your income comes from, if your expenses are being sunk somewhere in particular, or if you need to reconsider a certain costly product dragging down production.
Your business numbers and your accountant
Numbers are more than just following the local requirements to ensure your business is compliant. Today, with online accounting & invoicing software like Debitoor, you have more access to the important numbers in your business than ever before.
Because accounting software is not meant to replace an accountant, it not only makes it possible for you to see your business numbers at an overview, it also makes it easier for your accountant to understand and interpret the data. This means they are able to give you better feedback more quickly.
While it may seem like you don’t need this kind of feedback from an accountant, they can catch things that might be easy to overlook - especially if things are going well with your business and the numbers look good. But an accountant has the insight (and the patience) to dive a bit deeper to see what’s happening behind the scenes. And what it might mean for your business.
How to keep track of the numbers
As you’ve likely gathered from this article, there are many reasons for staying on top of the numbers. There are also solutions that make this simple and fast. Debitoor provides you with the tools you need to manage your incoming and outgoing payments.
On the larger plans, it’s possible to generate financial reports such as the balance sheet, VAT report, and profit and loss report with just a few clicks. And if you're looking to better understand these reports, check out our blog post: 'Reading reports: evaluate your year'.