Which numbers to track for my business?
There are numbers and there are NUMBERS. Some matter more than others. Some matter to you but not to your accountant. Some are required for tax purposes but some are required so you can determine your destiny.
Not all numbers are created equally. And, different numbers have different levels of importance in different practices. Your bookkeeper may be used to tracking money only. That's fine, but you may need a new bookkeeper, if the old bookkeeper is reluctant to extract the details you're looking for.
I am known as the number whisperer because I believe numbers tell you EVERYTHING!
Some numbers have to come from places other than the checking account. What do you want to see? Let's keep it simple for now. But you need the basics: revenues, expenses, profits. And you likely want to see the expenses broken down into three categories: payroll, marketing and other (everything else). Reports featuring fifteen or more categories of expenses are unreadable.
What gets measured gets done. So you need your reports to actually allow you to measure what's happening, and that extends to activity and behavior. Your reports need to go beyond money alone.
A picture is worth a thousand … dollars!
To get started, you need to keep up with your revenues on a rolling twelve-month basis. Create a report that shows you what has happened for the past 12 months. Instead of your reports showing the current month and year to date, which is often the default, get a report that shows the current month plus the total of the past twelve months.
At the end of January, for instance, you'll look at a total running from February 1, 2020 through January 31, 2021. That will show your annual revenues rolling along as you go through the year. If you're shooting to do better than $1,200,000 for the year, you'll know whether you're trending in the right direction. You can use this rolling twelve-month total (some call it a Trailing Twelve-Month average or TTM) for numbers other than revenues.
You can create a TTM number for anything important to your progress. But the real magic happens when you turn those numbers into a graph--a graph of trailing twelve-month totals. A picture really is worth a lot more than the numbers it represents. A graph shows you trends in an instant. Instead of requiring you to read and understand the numbers in each column of a report, a graph allows you to see all the numbers presented in a simple, visual format.
It's the best way for your brain to process the information you need. You can use TTM graphs for nearly anything. Use graphs for expenses, profits, consultations, new clients, closed files, etc. Trailing twelve-month graphs give you a quick feel for your business, so that you can figure out how you're doing every month of the year.
This work is not hard, but you may need some assistance. Creating USEFUL reports is what I do for my clients - reports that help them understand EXACTLY where they are in their business. I do this as part of my VIRTUAL CFO service.
If you want to know more about the service or how to understand your numbers better, book a complimentary number review session with me. No strings attached.
Book it here at www.speakwithdiana.com
Next week, I will reveal more about your most important numbers.