There are many areas of business that are tempting to do your self. Consider the opportunity cost of doing the things you are not expert at I share some examples in this video. Reach for a free strategy session and I can look over it with you.
They might just be digits, but numbers offer a wealth of insight into any business. They tell you how you’re going, where you’ve been and also allow you to set goals and plan for the future.
Importantly, unlike words which can be misinterpreted, numbers cannot lie. They are clear, they are obvious and using them should be a foundation for any business.
Here are four secrets your business numbers reveal.
Whether it’s your sales reports, your profit and loss or your Business Activity Statement, numbers paint a comprehensive picture of where you have been.
They illustrate growth phases, lulls, busy periods, successful strategies, and products which may not have sold so well.
When viewed over the history of a business, numbers tell you what worked and what didn’t. They also reveal the ongoing success or decline of your business.
In the latter case, these numbers may not be what you wish to see, but they empower you to make the change you need to turn things around.
Your current figures show you how your business is tracking compared to your past and your intended future. They allow you to see where you are compared to KPIs and also previous years.
This is incredibly powerful information for any business owner to have at their disposal.
If your numbers are telling you your business is not where you had hoped in terms of past performance or KPIs, it allows you to alter course or invest where required.
If your numbers indicate growth or that you have met your targets, it allows you to enjoy the win that can feel so rare in business and build further on your success.
An often-overlooked secret that numbers can reveal is the potential of your business. And sometimes this information is gleaned by the numbers that are missing or the gaps that become evident.
For example, numbers can reveal trends that you can capitalise on, products or services that are growing and could be added to further. They can also reveal inefficiencies in a business where you have the potential to cut costs and enjoy a better return.
Setting goals and having an up-to-date business plan are key to the success of any business, and your numbers are an integral component of both. Numbers transform arbitrary goals and ideas into action by enabling you to understand clearly where you are and where you wish to be.
Numbers then help guide this process, allowing you to set targets and key performance indicators.
Furthermore, numbers allow you to plan. When you have clear financial forecasts, you understand what you need to do, how you need to do it and the milestones you need to reach along the way.
For many business owners, numbers can overwhelming. When you’re a growing small business, they can also feel like the last thing you wish to delve into at the end of a long, busy day.
But when you know your numbers, when you understand them and when you use them to plan for the future, numbers can empower your business to achieve greater success.
They allow you to see your business for what it is, what it could be, and plan for how to get there making Better Business Decisions.
Numbers are important throughout the life of a business, but perhaps never so critical as when it comes time to sell.
When presenting a business to buyers, numbers tell the story of what your business is, where it has been and where it could potentially go.
Here’s an insight into the numbers that matter for sale, and how to ensure you books are in the best possible shape.
If you’re planning on selling your business, the numbers are the first factor any prospective buyer will seek to understand.
Chances are it won’t just be them perusing your financials, either. There’s a likelihood they will engage a qualified accountant to take a deep dive into those figures as well.
The tidier your books are, the better and more professional your business looks, and the easier it is for buyers to fully comprehend your business operation and its potential.
So, what numbers will they be looking for and what should you make available?
Your financial statements paint a detailed official picture of where your business has been and where it could potentially go.
Including profit and loss, gross and nett income, this is likely to be the first document every buyer seeks. If a potential buyer requires finance, this is also one of the most critical documents that a lender and accountant will assess.
Chances are a prospective buyer won’t just rely on the profit and loss, but will look to go deeper into your sales history.
The sales figures allow them to understand cash flow trends, popular product lines and services, and peak or slow periods. It also allows them to identify where there may be a gap in the market that they could fill.
An asset list allows a prospective buyer to understand exactly what comes with the business for sale and what liabilities they may have in terms of aging or outdated equipment.
This will be a non-negotiable document and should include the depreciation schedule from your accountant.
The inventory list allows a buyer to understand what stock is included in the sale, what has been sitting in a business too long, and whether they will require immediate cash to re-stock low items. Again, this document will be non-negotiable.
Your price list indicates where you stand compared to your competitors in terms of the products or services you offer. It allows a buyer to gauge whether there’s potential to raise the price, whether items or services are priced fairly, or whether they could gain better efficiency by manufacturing the item differently, or sourcing it elsewhere.
A list of debtors and creditors tells a story about your customer service, and your business’ reputation when it comes to paying its dues. Outstanding debtors may indicate unhappy clients, while outstanding creditors might illustrate your business has a poor reputation for paying its bills.
If your business has existing staff this can be both a positive and a negative for any potential buyer. They’ll be seeking to understand staff levels, staff expertise, staff costs and any entitlements that they will be liable for in the near future, like long-service leave.
Together, these items paint a comprehensive picture of any business operation and if you’re serious about selling, you should have them at the ready.
It’s also important to note that throughout the life of a business, numbers like those listed above are critical to business success. In addition to assisting potential buyers make decisions about your business, they can also aid you as the business operator when it comes to running your business day-to-day.
Our advice? Don’t wait until it comes time to sell. Know your numbers, know your business story, and empower yourself to make Better Business Decisions.
There are mountains of research on why we get a fear response to things.
The fear response is that empty feeling in your gut, the racing of your heart, palms sweating, and the nervousness.
Fear is as basic a human process as breathing and it allows us to escape and avoid threat. There is a lot of research about why and how it comes about but still it is not fully understood.
People tend to fear what they don’t understand or know – things we don’t understand are seen by the brain as threatening.
That means ambiguity is terrifying to us because we need to know what’s happening in order to feel safe. To make things worse, the behaviour of people around us can influence our response to the unknown.
In our hyper-informed world we see little bits of everything and it is very hard to piece together a full picture – that leaves unknowns and ambiguity causing us to feel scared.
Put more simply,
Once we understand something, we know what to do; if we don’t understand it, we start to panic.
So …
“The solution is facing the thing we’re afraid of. … However, we have to be willing to accept a certain amount of fear in order to beat that fear.”
David Tolin, author of Face Your Fears
For many, accounting falls into the category of things we don’t understand.
You might think you’ve never been good at numbers or you may have been told you are not smart enough to understand them. Perhaps an accountant or a family member has told you to leave it to the experts or outsource it.
However, as you know, I believe all business owners can understand accounting once they view it as the story of their business. For me, it is an absolute privilege to work with business owners and managers to overcome their fear and lead them to a state of confident curiosity.
Here’s how you can come to understand your business numbers and be able to listen to what they want to tell you.
Step 1: Accept some fear to break your fear.
Accounting might not be your comfort zone and that’s OK. Now how will you accept and address it?
Fear is a powerful force but all that stands between you and your fear is action
Thank you for accepting some fear in order to beat your fear!
What Action can you take to introduce yourself gently to your numbers? Here are some suggestions:-
– If some one else is preparing them ask them to walk you through what they do and why
– If you are doing them yourself have a crack at looking at a profit and loss statement
Step 2: Familiarity breeds understanding
Action also builds confidence . Confidence is acquired and developed – no one is born with it.!
We destroy fear over and over with confident action .
Like any new skill working with business numbers takes time to master. At first you just need to follow through anything you think isn’t right – over time as you correct the buckets your data is collected into you will be able to interrogate the story to give you suggestions for improvement.
Find a trusted business ally to work through your numbers, tell you what they mean, and which ones are most important to your business story etc
Step 3: Using the force
Our force is “curiosity” – you can never ask too many questions when it comes to your business.
As a business owner It is your responsibility to understand every aspect of your business in order to bring it all together and deliver the special gift you have to your customers.
The lovely thing about curiosity around your business numbers is the increased understanding that ripples out from it.
You may find you need to repeat these steps in the various areas of business numbers until fear is completely locked away. Business is a journey of ups and downs and fear creeps back in sometimes. Remember to take action, build confidence and curiously seek answers to improve your business position.
Reach out if you’d like a hand to harness those numbers to make better business decisions
For the past 10 years I’ve been independently helping businesses make better decisions by providing unbiased and objective analysis of their numbers.
Some of these businesses I have worked with directly in detail and others just in passing, some have been tiny and some have turned over millions, but all too often I have found business owners abdicating responsibility for their numbers and losing touch with what’s happening.
The consequences are heart-breaking and range from misguided decision-making to serious fraud. As the business owner, you have no choice but to pick up the pieces.
So let’s make sure these things don’t happen to you. I beg you to “Do yourself a favour” and start to “engage” with your numbers. Here’s an insight into how…
Have a business fitness regime that includes weekly, monthly, quarterly check-ins with your reports and/or numbers people.
Print your results so you can draw on them and compare with the next round. It might be that your gut instincts have got you to where you are, but the aim is to let the numbers guide you to where you “want” to be.
Make sure the numbers align with what you expect is happening in the business. Is it performing how it should? Ask questions, get curious, and investigate.
You are the business owner which means the buck ultimately lies with you, so occasionally a little healthy skepticism might be required when it comes to the numbers you are presented.
Prior to DIY database accounting, accounting systems were elegantly simple. There were routines and reports in proven formats that had to be run at month-end to save hard drive space. These reports were at our fingertips and could be physically retrieved, reviewed and compared at any time.
Now in the information age they are all there “inside the screen” sliced, diced and delivered in whatever format you ask. The first question though is, ‘Do you know what to ask for?’.
This flexibility has undermined the confidence of many a business owner, but it shouldn’t.
Discuss your results with external mentors and explore possibilities.
Most of all be strong and determined or your “lizard brain”. Your primal doubts will keep telling you that you’ll never understand it.
The truth is:
Feel empowered to call the shots. Interrogate the numbers of your business. They tell the story of your past, present and future and the numbers team supporting them rarely have the wisdom to know what they should measure.
Did you know that much of the tax accountant’s time is spent sorting garbage?
Many business owners think “I’ve done it all there’s nothing for them to do” but in reality, the accountant gets stuck sorting the garbage that comes from the false promise of Do It Yourself Accounting.
It’s no wonder they seem grumpy and unapproachable much of the time.
I know your accountant would prefer to be helping you improve your business rather than fixing up your bookkeeping.
So how can you get more bang for your buck?
One way to ensure your accountant is not wasting valuable time and effort is to make sure you (or your bookkeeper) reconcile and check all balance sheet items.
For example, your bank reconciliations should rarely show outstanding receipts or payments in this day and age. The cheques aren’t in the mail! Investigate now and delete any stray transactions.
If there are bank feed items that don’t need to be added – delete them.
We know you’ve heard it before, but it’s a common error so is worth repeating – don’t mix business and personal in your bank accounts.
When it comes to working out the numbers, mixing the money muddies the waters and quite simply, it’s a dreadful waste of time. Every time someone is required to look at the numbers and decipher between business and personal their time is misused, and you don’t want the ATO looking at your disorganisation!
Another way to streamline tax time is to tidy up loose ends.
Look at items like your customer and supplier aged trial balances / ledgers and read your profit and loss statements. These should be telling you the story of your business as it stands as well as its income and expenditure over the period you choose to review.
Then question them. You know your business – do the numbers shown make sense?
If they don’t, get curious and “drill down”. Look behind the numbers to see the transactions that make it up – should they be there?
Maybe your software made decisions for you that were incorrect.
If you find your numbers are a mess, seek help. Talk to your accountant before they start work on it. Let them help you to understand the anomalies. They are in the best position to fix or refer you to a specialist bookkeeper.
Whether you are a small business or a multi-million dollar business, your accounting data is the place where you find the pearls of wisdom that improve your decision making and propel you toward your goals.
Unfortunately though, business owners everywhere avoid their numbers and so stunt the growth of their business and their dreams.
So what should you do? Here’s an insight into how you can simplify your numbers and really understand what they mean…
Do It Yourself accounting is a double-edged sword. On the one hand it makes it easy for a business to record data but on the other it doesn’t provide the necessary guidance. Some business owners are often left bewildered and feeling stupid.
Instead of four elegantly simple pages of information that lay out the story of their business they are faced with screens full of possibilities – or are they just gobbledegook.
Without foundational principles and guidance, business owners are swamped with information that doesn’t feel right and they rapidly lose faith in their own abilities.
Worse still, they send that data to the accountants who charge big bucks for someone else to sort it out. In this case they still remain deprived of the ability to make the best decisions about their business.
Instead business owners need to empower themselves by getting to know their numbers, and it’s easier than many would have you believe.
Print your four basic reports, (yes, I said print – we want to touch, feel and scribble on them).
These report names may vary depending on your software, but relate to the following:
With these reports in front of you, ask yourself these questions;
Now if the answer to any of these questions is NO, then it’s time to speak to the people responsible for data entry and start tidying up the loose ends.
If you answered YES then congratulations – the basics are covered and you’re ready to check for pearls of wisdom within your numbers.
This video will help you to understand just how easy it is to have wrong information in your accounting system. Get into it as soon as you can - after all you are the business owner and you have a right and a need to know what's going on!
The best thing about working one-to-one with my clients is finding ways to help them break down the unique barriers they have about understanding their numbers. In this video business owners can see that self-doubt is a common problem when it comes to business numbers. Who can you collaborate with to gain a better understanding of your numbers? The more you view your numbers with an expert the better your understanding will become.
This video quickly explores the importance of the right accounting software - getting it right will save you time money and angst. Modern software advertising can be misleading. The most important aspect is enter once use often.
