Tracking numbers may be the part of your business that you are most afraid of, or the most bored by. The fact of the matter though is that you will be responsible for certain figures whether you are afraid or bored or not. When you keep good metrics and learn how to use them, you will learn to take comfort in them and use them to have more confidence in your business decisions.
Tip #1: Get the right people on board
Some people get really excited by a good graph or a report; we call them bookkeepers, accountants, and tax attorneys and you should make a goal to have one of each on your team. As Jim Collins taught us in Good to Great, it is important to get the right people on your team if you want to succeed.
Tip #2: Know what to track and how to track it
Just because you have the right people in place doesn’t mean you don’t have to think about your finances anymore. You are responsible for knowing what to do with the information the people on your team give to you and how to act on it. You should have a monthly financials meeting with responsible parties and the decision makers in your organization. At this meeting, plan to go over the following reports:
- Budget & Variance Report
- Cash Flow Forecast
- Balance Sheet
- Accounts Receivable Aging
- Cost of Inventory
These reports make up your dashboard. At first it may feel like a lot of different numbers and a lot of new terms, but stick with it and ask whatever questions you have. You are ultimately responsible for what each report contains. Over time you will learn how to interpret what the numbers tell you and how best to plan and adjust. Then you will better appreciate how these metrics help you run your business.