If you choose to outsource your bookkeeping; It’s not just a case of handing all your financial information over to your bookkeeper and letting them run things. There is some basic financial information you need to keep an eye on in order to plan and ensure your business is running well. 

Here are 10 “numbers” that you need to know at least on a monthly basis.

1. Monthly Sales number

What income (not profit) did you have come in last month?

Why you need to know; You cannot effectively manage your expenses unless you know what you have coming in. Generally; unless you are in the start-up phase and have some kind of credit extended, your expenses should always be less than your income.

2. Monthly Expenses Number

There are two main expense numbers; Cost of goods or services sold (the expenses you have to pay in order to be able to make a sale) and Expenses. Expenses are then further divided into Fixed and Variable. You need to be aware of all three.

Why you need to know; You need to understand where your expenses are in relation to your income so that you can make decisions around what is necessary cost vs what is nice to have. Cost of goods/services sold are always necessary but for expenses – do you really need those post-it notes?

3. Budget vs Actual Numbers

To really get a grip on your income vs expenses you should create a budget and then compare your budget monthly to see what your actual numbers are.

Why you need to know; This will give you extra information around where you might be overspending and where you can cut some costs and is much easier to read that the monthly expenses number as the numbers will be in the categories you are tracking such as office supplies, software, workshop materials and meals and entertainment.

4. Accounts receivable Numbers

These are any invoices you have issued that have not yet been paid.

Why you need to know; As a busy entrepreneur, sometimes it’s easy to forget who you invoiced and who has paid, especially if you are billing clients at the beginning or end of the month and sending out multiple invoices at once. The accounts receivable report lets you know who, how much and for how long you are owed money.

5. Sales Tax Numbers

If you are registered and collect sales tax on your invoices and claim sales tax on your expenses, you will want to review this regularly.

Why you need to know; Knowing what you owe on a regular basis will allow you to set aside the relevant amount of tax money so you don’t get caught owing a bunch of money when the time comes to pay your taxes. You don’t always realize what you can and can’t claim sales tax on when it comes to purchases or how this is accumulating on a regular basis unless you review it. This will avoid any nasty surprises.

6. Profit & Loss Year to Date comparison numbers

How is your business doing year over year? 

Why you need to know; Hindsight is always a wonderful thing! Being able to look back at previous years and compare months will give you an idea on things like seasonal trends, sales spikes and expense sucks. You can dig further into the transactions for certain months and see if there was anything that is worth repeating like an awesome sales campaign that bought in extra income, or if there were expenses that could have been pushed off or eliminated.

7. Sales by customer numbers

How much money is each customer spending with you?

Why you need to know; Understanding who spends what money with you and comparing that to how much time you spend working with each client is a great insight. You will know who are the clients you want to work with and who are ones that are costing you money.  If you have residual income products, you may not always be aware of who has spent what. Understanding this information also contributes to creating your ideal client personas. If you see patterns in demographics amongst your big spenders; This lets you know who is more likely to buy from you in the future.

8. Sales by product/service numbers

Which products are selling well?

Why you need to know; This is especially good if you have residual income coming in. If you have products or services that are not selling well and you are putting time and money into building and promoting them. This is an opportunity to have a purge! On the other hand if you see products and services selling well, this can help you decide on increasing your advertising and promotions around these offerings or even updating them if they are older.

9. Cash Flow Statement numbers

Concerned with the company’s profitability, the cash flow statement shows you how your money is distributed across a time period.

Why you need to know; The cash flow statement specifically looks at how much money is coming into and going out of the business at any given time to understand the effect daily operations have on the business’s overall financial position. This is especially important so you can plan when to pay for upcoming purchases. 

10. Balance Sheet Numbers

This is a financial picture of where you are at, as of a specific date.

Why you need to know; It runs down the assets (what the company owns), its liabilities (what it owes) and the difference between those two, or the company’s equity. The Balance Sheet can be used to identify trends and make more informed financial accounting decisions. It is also important to lenders, as they will use it to determine a company’s creditworthiness.

Most of these numbers can be found as reports in your bookkeeping software. If the software you are using does not have these reports – change your software! These numbers are critical for you to know in order to make good business decisions. Choosing “cheap” bookkeeping software that does not provide you with this information will cost you more money in the long run.  QuickBooks Online provides all of the above-mentioned information as does Xero and Sage.

Now it’s your turn. Share your thought and tips below!

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