Managing by the Numbers
By Myrna Stacey

Orginally appeared in New England Women Business Owners October 2007 Newsletter

Owning and running a business can certainly be demanding.  Whether you work alone or have employees, sell goods or services, doing what you do best is only a piece of the operation. Managing the operation that provides the service is a whole other ball game.  Statistics show that most small businesses do not fail because their products or services fail. More often than not they fail because providing their service is all they do well. Unfortunately, it takes more.  One key piece is the financial piece. A proactive accounting system can help any size company navigate through a good and bad economy by providing information and information, is, power.

Get a bookkeeping system in place

No matter what volume of activity you have, having a record keeping system that keeps the data up to date can be crucial.  Having actual numbers available for analysis can help manage the business.  There are several low end accounting packages that allow you to produce invoices and pay bills easily. If you do your books by hand, these same packages can be used to summarize your activity monthly.  Waiting until the end of the year and then sending your books to the accountant will only tell you what you did last year. Using your information on an ongoing basis can help you get to where you want to go.  If you don't have time to do this yourself, this is one business function that can be easily outsourced to a bookkeeper. Remember, it's the signing of the checks that gives you the control of your business, not writing them out.

Know your costs

If you know what it costs you to provide your services (or sell your products) you are in a good position to negotiate prices. What we charge our customers should cover all our costs and include some profit.  Knowing your costs can tell you how many customers you need to see, how many products to sell or how many hours to bill in order to reach your goals.  It also arms you with enough information to know if you can give a discount and still come out ahead.

Understand the story

Believe it or not, financial reports tell us a story. They tell us about the financial health and well-being of the business. They tell us how many cents out of every dollar we bring in goes out the door and what it pays for. They tell us how good we are at pricing, buying and spending. They tell us if we met our expectations and goals.  Financial reports used on a monthly basis to monitor the business are a powerful tool. Learn how to understand what they say and use the information they convey.

Managing by the numbers provides the business owner with a real picture of the profitabilitiy and sustainability of the business. It's not just about generating revenue it's about making a profit. It's about fulfilling a dream and supporting a lifestyle. Managing by the numbers can tell you whether it's working, and whether or not it's worth it. Knowledge is a powerful thing when we learn how to use it.

Myrna Stacey, CPA, PC ( www.mfscpa.com ) provides onsite quality bookkeeping, accounting services, and QuickBooks consulting. She can be reached at 508-647-9774 or myrna@mfscpa.com .

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